Softer Economic Data Do Not Signal a Change in Underlying Momentum
- This week’s larger-than-expected declines in durable goods orders as well as new and existing home sales do not signal a shift in the economy’s strong underlying momentum. Some payback in home sales was widely expected and monthly data are particularly volatile in the normally slow winter months. Survey data for the factory sector suggest that production and employment are still in the early stages of revving back up, and the latest weekly first-time unemployment claims fell to the lowest level since they spiked, following the onset of the pandemic.
Signs of Life in Europe, but Most Countries Still Chasing the United States
- The preliminary March PMIs for the Eurozone showed a vibrant manufacturing sector that is only partially offsetting a service sector that remains largely stuck in the mud. The U.K. economic outlook is starting to brighten, while the Bank of Mexico decided to keep its policy rate on hold during a highly anticipated meeting.
Interest Rate Watch
Short-Term and Long-Term U.S. Yields Diverge
- Rising long-term Treasury yields took a breather this week. Accelerating real GDP, employment and prices, as well as an eventual taper of Federal Reserve asset purchases in 2022, should keep longer-dated Treasury yields grinding higher over the course of the year.
Topic of the Week
The Hits to Global Supply Chains Keep Coming
- The extended blockage of the Suez Canal this week by a container ship is yet another challenge for global supply chains already strained by the pandemic. Inventories were already tight before the latest disruption, and with delays coming at a cost, the inflationary pressure stemming from the goods sector is not likely to go away soon.
Don’t Sweat February’s Pullback in Home Sales
Both existing and new home sales fell more than expected during February, with existing sales falling 6.6% and new home sales tumbling 18.2%. While the declines were larger than expected, the data were widely expected to decline in February, following the surge in sa