US real GDP rose just 1.1%, a big drop from the 2.6% GDP in Q4 and lower than estimates (1.9%)
It was the lowest GDP print since Q2 2022 when growth was negative to the tune of -0.6%... Personal Consumption added 2.48%, up from 0.70% in Q4. Fixed Investment subtracted -0.07%. The big hit was the change in private inventories, which subtracted 2.26% from the GDP print. Net exports were a modest contributor to GDP, adding 0.11%. Government consumption added another 0.81% to the bottom line number, effectively contributing more than 70% of the final print. Source: Bloomberg, www.zerohedge.com
Why are US bond yields moving higher despite GDP growth miss? US Q1 Core PCE is higher than expected
While US GDP Q1 growth rate came in well below expectations, PCE and core PCE prints were unexpectedly hot, the former coming in at 4.0% above the 3.7% expected and higher than the 3.9% in Q4, while core PCE came in at 4.9%, well above the 4.4% in Q4 and also hotter than the 4.7% expected. In fact, as shown below, this was the 5th consecutive "beat" of median core PCE expectations.
Germany will go from being a net exporter of electricity to a net importer of electricity in Europe
Germany will go from being a net exporter of electricity to a net importer of electricity in Europe after the nuclear power plants are shut down. Last week, electricity imports reached their highest level in one day since 2021. Source: HolgerZ, Bloomberg
Ifo expectations index came out way better than expected
German Ifo Business Climate Index improves to 93.6 in April from a revised 93.2 in March. Ifo current assessment index fell to 95 (vs 96 exp. from 95.4 in March. BUT Ifo expectations index improves to 92.2 for the 6th month in a row from a revised 91.0 in March & way above 91.1 expected. Source: Bloomberg, HolgerZ
Houston we have a problem...
While equity markets seem complacent about the imminent debt ceiling crisis, the same can not be said of the rates market, where the "kink" in T-bills maturing around the X-date is turning spectacular... Bottom-line: The spread between 3-month (5.12%) and 1-month (3.40%) Treasury yields has never been higher: 1.72%. Indeed, the yield on US T-Bill which mature BEFORE June is much lower than it should be given the current level of the Fed Funds rate: below 4% vs. a Fed Funds rate already close to 5%. This premium is probably related to the fact that, for T-Bill maturing before the end of May, there is no uncertainty related to the debt ceiling, since the US Treasury will have the cash needed to meet principal redemptions. But from June onwards, the risk of the debt ceiling being hit increases; this triggers a jump in yield with T-bill yielding roughly the same than Fed Funds. Source chart: Charlie Bilello
There is a huge dichotomy between US Homebuilders stocks performance and US housing starts
US Home Construction ETF ($ITB) is at a 52-week high, up 25% over the last year. Meanwhile US Housing Starts are down 21% from their peak last April.
US Housing Starts were were down 17% over the last year, the 11th consecutive YoY decline
US Housing Starts were were down 17% over the last year, the 11th consecutive YoY decline (longest down streak since 2009). Tends to be a leading indicator for the economy, recessionary signals continue to build. Source: Charlie Bilello
UK Food Inflation continuing to make cycle highs of up +19.6%
UK Inflation surprises to the upside at +10.1% YoY. The surge in UK Food Inflation has been contributing to it.
