Olivia

Summary Consumer income is growing, but not as fast as inflation. Consumers had to dip into savings to pull it off, but not only did real personal expenditures rise in March, revisions listed real February spending into positive territory as well. Rainy day savings won't last forever, but for now, at least the desire to resume service-sector activity is more powerful than inflation. Experiences over stuff drives spending gains in March In the wake of yesterday's negative GDP print, the additional detail from today's March personal income and spending report point to consumer spending growth that is outpacing the fastest inflation in decades. Revisions to prior months' sales figures now confirm that despite initial reports that inflation outpaced spending in February, the opposite is true: real personal spending was positive in each of the first three months in the first quarter. Admittedly a downward revision to January keeps the level only slightly higher. Still, real PCE rose 0.2% in March, on top of upward revision to February that brought the monthly change to a +0.1% (-0.4% previously). For months, we have described our expectations for consumer spending to continue to be driven by service outlays and that some of the… Read More »Consumer spending outpaced Inflation every month in Q1

Summary Consumer income is growing, but not as fast as inflation. Consumers had to dip into savings to pull it off, but not only did real personal expenditures rise in March, revisions listed real February spending into positive territory as well. Rainy day savings won't last forever, but for now, at least the desire to resume service-sector activity is more powerful than inflation. Experiences over stuff drives spending gains in March In the wake of yesterday's negative GDP print, the additional detail from today's March personal income and spending report point to consumer spending growth that is outpacing the fastest inflation in decades. Revisions to prior months' sales figures now confirm that despite initial reports that inflation outpaced spending in February, the opposite is true: real personal spending was positive in each of the first three months in the first quarter. Admittedly a downward revision to January keeps the level only slightly higher. Still, real PCE rose 0.2% in March, on top of upward revision to February that brought the monthly change to a +0.1% (-0.4% previously). For months, we have described our expectations for consumer spending to continue to be driven by service outlays and that some of the… Read More »Consumer spending outpaced Inflation every month in Q1

European stocks have outpaced the US today, moving higher as markets look towards more support for the Chinese economy. European markets rally on hopes of China stimulus “A gulf has opened between Europe and the US, as the former rally while the latter drops back. US stocks enjoyed such a strong day yesterday that some caution was inevitable, while the mixed picture following US tech earnings and the contraction in US GDP isn’t helping sentiment on Wall Street. But higher commodity prices have helped stabilise industrial European stocks, and crucially the magic promise of Chinese stimulus has appeared, pushing up commodity prices and giving stocks across the continent a lift.” Oil prices extend gains “A third day of gains for oil prices comes as talk of a European ban on Russian oil and gas imports steps up a gear. In addition, US consumption has taken a leg higher, assuaging some concerns about a slump in demand in response to higher prices. But next week’s FOMC meeting might prompt some nerves to creep back in again, either as the Fed signals its concerns about growth, or if the dollar bounces again on a more hawkish meeting.”

A notable recovery in 2021  Real estate market activity in Spain recovered spectacularly in 2021, after collapsing in 2020 due to the lockdown measures introduced to tackle the Covid-19 epidemic. Nearly 670,000 real estate transactions took place last year, a level not seen since 20071 (see chart 1). According to INE, housing prices rose by 3.7% in 2021, continuing the strong pace of the last six years (average yearly increase of 4.9% between 2015 and 2020). Although housing prices are still 10% below their peak in summer 2007, price growth is accelerating. Figures from Tinsa show that this trend continued in the first quarter of 2022, with a 6.8% year-on-year increase in March. This indicator is well correlated with the INE quarterly index. However, these figures hide significant differences between regions. In the Madrid area and tourist and/or densely populated regions (Balearic Islands, Melilla, Ceuta), real estate prices have recorded rapid growth since 2015; indeed prices in some regions are now higher than they were in 2007/2008. Conversely, in rural and more sparsely populated regions (Extremadura, Castile and León, Navarre, Aragon), prices are fluctuating at least 20% below their levels of fifteen years ago. This said, the number of real estate transactions in… Read More »Spanish housing market: Cautious optimism

Summary In yet another sign the labor market continues to tighten rapidly, the Employment CostIndex rose a record 1.4% in Q1, vastly exceeding expectations. The pickup comes despite increasing availability of labor supply, signaling that cost pressures from the tight labor market will not be easily stomped out. The FOMC is likely to stay on an increasingly hawkish path as a result, given labor costs represent a more persistent threat to the inflation outlook. Wake up call for the Fed The battle for talent escalated in the first quarter, with the Employment Cost Index jumping 1.4%–themost in the series' 21-year history and above expectations for a 1.1% gain. The pickup comes despite the increasing availability of labor, signaling that inflationary pressures from the tight labor market will not be easily stomped out. As a reminder, the ECI is the preferred measure of labor costs among Fed policymakers. Unlike the more timely average hourly earnings in the monthly nonfarm payroll report, the ECI controls for compositional shifts in the workforce, which have been unusually large over the past two years. It also includes benefits, which account for 31% of compensation, therefore giving a more complete picture of the costs employers are… Read More »Race for workers shifts into sixth gear

The British pound bounced back as data showed that home prices continued rising. According to Nationwide, the average house price in the UK jumped to £267,600 in April as demand continued rising. Prices rose by £2,000 on a month-on-month basis or 12.1% on a year-on-year basis. However, the increase was slower than most analysts were expecting. Housing demand has risen while inventories has been subdued. Therefore, there are concerns about whether this demand will continue as the Bank of England hikes interest rates. In a note, an analyst at Capital Economics said that home prices will drop by about 3% in 2021 and 1.8% in 2024. The euro rose against the US dollar even after data showed that many European economies were slowing. In France, data revealed that the economy stagnated in the first quarter while inflation jumped by 5.4% in April. In Italy and Spain, their economics contracted while in Germany, the economy expanded by just 0.2%. The statistics agencies attributed this performance to the soaring prices, which helped to slow consumer and business demand. Meanwhile, according to Eurostat, preliminary data revealed that inflation rose from 7.4% to 7.5% while core CPI rose from 2.9% to 3.5%. European stocks… Read More »DAX, CAC, and Stoxx rise as EU economy slows

In today’s Traders Edge Market Briefing, Tomasz found these amazing setups that we thought you’d find interesting.

WTI crude oil traded higher yesterday, breaking above the downside resistance line drawn from the high of March 6th. Today, the price emerged above the high of April 21st, at 105.90, a move suggesting that the outlook may be changing back to positive. However, we will adopt a neutral stance for now, and we prefer to wait for a clear break above the high of April 18th, at 109.55, before we start examining the case of a bullish reversal. Such a break will confirm a forthcoming higher high on the daily chart and may pave the way towards the peak of March 25th, at 115.85, the break of which could target a hurdle slightly higher, at 118.20, marked by the high of March 24th. If the latter barrier is not able to stop the bulls either, then its break could carry larger bullish implications, perhaps paving the way towards the high of March 9th, at 127.35. Shifting attention to our short-term oscillators, we see that the RSI lies slightly below 70 and points up, while the MACD runs above both its zero and trigger lines. Both indicators detect strong upside speed and support the notion for further advances in the… Read More »WTI breaks above a downside resistance line

The Euro turned positive for the first time after six straight days in red, as traders collected profits, but recovery attempts were so far limited and facing strong headwinds. Oversold daily studies suggest the pair may enter correction, but fresh bulls so far struggle to sustain recovery from new five-year low, posted on Thursday. Daily techs in bearish setup and overall very negative sentiment continue to weigh on Euro, while comments from ECB’s chief economist that the first rate hike in not an issue but the question is the pace in which the ECB continue to tighten its monetary policy, made a minor impact to the EURUSD’s performance. The pair is on course for the biggest weekly drop since the last week of March 2020 and large bearish weekly candle is expected to weigh, but formation of daily inverted hammer candle would generate initial positive signal and possibly reduce strong bearish pressure. However, recovery needs to extend above pivotal Fibo resistance at 1.0648 (38.2% of 1.0936/1.0471 bear-leg) to sideline bears. Res: 1.0564; 1.0580; 1.0648; 1.0700 Sup: 1.0490; 1.0471; 1.0400; 1.0340

The Federal Reserve and Bank of England are both expected to raise interest rates in the upcoming week, though the former will likely do so by a larger increment. However, it’s much more of a puzzle what the Reserve Bank of Australia will do as pressure is mounting on the central bank to get the rate hike ball rolling in May rather than in June. It will also be a busy week for jobs data as apart from the all-important US nonfarm payrolls report, Canada and New Zealand will also publish their employment numbers. OPEC holds its monthly meeting too next week but is not anticipated to pump more oil even as European leaders ponder whether to block the import of Russian oil.