Economic and company news – March 2022

March 31, 2022 - US Personal Spending.

This number which covers both services and manufacturing is holding up well, though it could be argued there is a lower trend.



March 31, 2022 - US Personal Spending.

As prices jump, we'd expect spending to fall. The prior 2 months were all over the place but are net a 0.9% increase per month. This month's 0.2% comes in light by comparison and is the lowest number for over 6 months supporting the idea that despite rising wages, the consumer is not increasing spending.



March 31, 2022 - US Personal Income.

Personal income holding up well which is to be expected given the strong labour market.



March 31, 2022 - China Listed Property Companies shares suspended.

Continuing malaise in the China property market. I expect we'll hear of second round defaults and write-downs as investor continue to mark their holdings down.




March 31, 2022 - US RH CEO comment.

Such a frank statement from a US CEO. Note RH is in the home/ consumer cyclical industry.  One negative comment does not indicate industry wide concerns but clearly this CEO has seen a change in the US consumer.



March 31, 2022 - UK Nationwide Housing Prices.

Nationwide is a major UK lender of mortgage products.  I can only describe this as panic buying in the face of rising rates over the next 12 months.  A combination of price momentum and buyers seeing their last chance to buy with low rates.

If lending standards are strong then there should be no issue. However, this does not stop a price crash in property and a massive blow to consumer confidence, rising unemployment. There will then be another call on government borrowing as we continue to consume the wealth of future generations.



March 31, 2022 - German Retail Sales.

Annual retail sales number continues to be high but noting this is a February number.  This annual number is using March 2020 to February 2021 as its comparative period which was the height of the pandemic lockdowns.  These annual numbers will begin to show rapid declines as we approach the summer months especially when inflation is backed out running at 7.3% in Germany.  This reveals volumes were flat despite the return to work commencing in 2021.



March 31, 2022 - German Unemployed Persons.

Employment continues to grow in most major economies. Yet to reach pre-pandemic low in Germany.




March 31, 2022 - China NBS Manufacturing PMI.

PMI for March is important since PMI is a leading indicator, unlike GDP. We knew China was slowing and this contraction helps explain why the Chinese Central Bank has once again reversed course and started easing financial conditions - in sharp contrast to other major central banks. The risk here will be inflation catching hold - note the rising input and output costs here.  China is battling a collapse of confidence in its property market and equities as international money exits both due to credit risks but also now will be less willing to return given the geopolitical situation between Russia and Ukraine.




March 31, 2022 - China Non-Manufacturing PMI.

In contrast to other major economies, China services sector shows a steep decline.  Perhaps this is due to the weak property sector in China which has hit the middle class.


March 30, 2022 - US GDP Growth Rate.

Noting this is Q4 2021, this is a strong GDP number and shows the continued expansion post the pandemic. Q4 will not include any possible downturn from consumer demand softening.  Employment remains strong in the US and this is driving a strong economy. Likely we are seeing a continue 2-tier economy with those on low pay suffering from increased housing and food costs but those with higher paying jobs feeling very affluent with equity and property prices rising strongly.




March 30, 2022 - Germany Inflation Rate.

A 40 year high in Germany for inflation. Much of this can be explained by short-term supply shocks. It is important now to watch wage negotiations to see if this inflation becomes endemic.


March 30, 2022 - EU Industrial Sentiment.

Still high by historical levels but rolling over.


March 30, 2022 - EU Economic Sentiment.

A drop is sentiment within the EU but worth noting services sentiment improved.


March 30, 2022 - EU Services Sentiment.

Perhaps as a continuation of post pandemic normality, services sentiment strengthens. This is in stark contrast to news on retail sales and inflation. Perhaps the service sector is not experiencing the same pain due to less input cost inflation.

This divergence should be noted in sector performance in corporate earnings.




March 30, 2022 - EU Consumer Inflation Expectations.

Crazy jump but not surprising jump in EU consumer inflation expectations.



March 30, 2022 - Spain Inflation Rate.

No wonder we see mass protests in the streets of Spain.  Inflation just shy of 10%, the highest in nearly 40 years will only fuel anger.






March 30, 2022 - Japan Retail Sales.

Weakness in Japanese retail sales as well despite dovish comments from the JCB on their rates.



March 29, 2022 - UK Bellway Half Year Results.

Bellway, a major UK home builder continues to see strong demand and continue to enjoy price increases.  Interesting to note how rate increases to date are referred to as "modest". However, they note increasing costs as a concern.

The consumer cannot suffer elevated consumer price rises permanently so whilst property may hold up due to low rates by historical standards, it may be more in consumer discretionary where the cracks appear first.




March 29, 2022 - UK Zoopla House Price Index.

The UK housing market continues to show high levels of buyer interest. Whilst there are signs of supply increasing there is little sign of prices peaking - February 2022 saw the YoY price growth increase over January 2022. Most buyers, and I include investors, are oblivious to the risks and economic prospects for the UK, let alone globally.  If prices maintain an upward trend there will be buyers ready to step in. Rates may need to rise for another year before this market is under control.  Buying continues to be cheaper than renting.





The following is from the January 2022 Zoopla report.



March 29, 2022 - UK Consumer Credit.

Mortgage approvals still at an elevated level for February. It is likely however that applications were made and buyers were planning such borrowing long before the economic news of 2022 which started to bite in February.  The UK housing market is very resilient to all sorts of worries whilst house prices continue to rise. If prices show weakness alongside increasing costs and a drop in confidence, this is a very large house of cards to fall and will likely lead to a rise in unemployment and the unwinding of rate rises which the market expects in 2023.



March 29, 2022 - UK Consumer Credit.

Large jump in consumer credit mostly related to borrowing on credit cards. This is either a sign of confidence or a lack of available cash. A very ominous sign given the rise in household bills.  How responsible will the banks be in their lending standards this time? Let's not forget these lenders likely have large mortgage books to consider.




March 29, 2022 - Spain Retail Sales.

Drop in the annual retail sales growth in Spain to flat. When you consider the last inflation number for Spain is 7.6% and sales growth is reported in nominal terms not real terms, this equates to a c.7% drop in volumes year on year.



March 29, 2022 - France Consumer Confidence.

France is showing weak confidence just like UK and Germany.




March 29, 2022 - Germany Import Prices.

A slight fall in the annual rate of increase for import prices in Germany yet when that annual rate is 26.3%, it offers little comfort. If prices remain anywhere near these elevated levels either businesses fail or consumer inflation continues to remain high which increases the chance of a wage-price spiral.



March 29, 2022 - Germany GfK Consumer Climate.

Another indication of collapsing confidence in the economy. Russia has an incentive in keeping Germany's input prices high to create continued pessimism and a recession in Germany. In this respect it is unlikely to co-operative in how it sells energy to Germany and what it refers to as 'unco-operative' nations.



March 25, 2022 - Germany Ifo Business Climate Index.

Another March number shows declining confidence, this time in the German economy. News today of Russia being unwilling to pump oil and gas unless payment is made in Roubles (after the G7 refuses to pay in Roubles) will not improve the outlook.  The Ifo index resumes the downtrend from the post pandemic recovery high in 2021 and is now lower than pre-pandemic 2019.



March 25, 2022 - UK Consumer Confidence.

UK consumer confidence in March approaches the lows in the pandemic.  Many of the middle class in the UK rely on property to boost wealth, much more than those across the rest of Europe. This is a March figure and therefore one of the more recent economic indicators. Nothing in March has improved sentiment despite equities roaring back. Let's wait to see what impact lower housing activity has on prices and housing sentiment over the summer. Rates are expected to continue rising for another year before falling as growth slows.



March 24, 2022 - US Durable Goods Orders.

For the first time since the pandemic hit, MoM durable goods orders fall over 2%. Since the S&P, unlike the economy, is weighted toward goods as opposed to services, this is another indication that 2022 EPS growth is slowing.  March will likely show this trend continuing.



March 23, 2022 - US New Home Sales. 

Whilst still at elevated levels, at similar levels to the same period in 2021, new home sales fall in February. With mortgage rates rising further in March, expect demand to contract further. Buyers, particularly investors, are still bullish due no doubt to the significant gains made over the many years of abnormally low interest rates. If inflation persists, this could all change.



March 23, 2022 - UK inflation rate. 

Highest UK inflation since 1992 when interest rates were over 10%.  This time around, labour is not as organised into unions but we are beginning to see more stories of employees forming unions.  This will determine how 'sticky' prices are as disposable incomes decline with rising rates.