Important note: The Administrative Measures for the Suitability of Securities and Futures Investors came into effect on July 1, 2017, and the views and information published through this WeChat subscription account are only for the reference of professional investors of Haitong Securities, and the complete investment views should be subject to the full report issued by Haitong Securities Research Institute. If you are not a professional investor among Haitong Securities clients, in order to control investment risks, please unsubscribe, receive or use any information in this subscription account. We apologize for the difficulty in setting access permissions for this subscription account, and for any inconvenience caused. Our company will not regard relevant personnel as customers because of the following, receipt or reading of the content of this subscription account, the market is risky, and investment needs to be cautious.
Haitong Macro Liang Zhonghua team
Authors of this report:
李俊 S0850521090002
王宇晴 S0850122070054
梁中华 S0850520120001
·Summary ·
Economy: In the U.S., economic growth is steady. Although the quarter-on-quarter economic growth rate in the first quarter was lower than expected, consumption remained stable from a structural point of view, investment also improved, and the economy remained strong in the short term. The year-on-year growth rate of new home sales in the United States rebounded in March, personal disposable income and consumer spending remained relatively stable, and the year-on-year growth rate of new orders for core capital goods rebounded. Inflationary pressures remain strong, with the PCE price index rebounding year-on-year in March and core PCE unchanged from February. In addition, the U.S. Markit manufacturing PMI fell below the boom and bust line again in April. In general, the United States is still more of a "inflationary" risk, the economy is stable, and there is no risk of "stagnation" for the time being, which is different from the "stagflation" environment.
The market expects an interest rate cut in September, and as of April 26, the market expects the Fed to cut interest rates for the first time in September, and is expected to cut interest rates once this year, with an annual rate cut of 25BP. The yield on the 10-year Treasury note recovered to 4.67%. In Europe, the Eurozone continued to diverge in April, with the manufacturing PMI continuing to weaken and the services PMI continuing to rise. In March, the year-on-year growth rate of crude steel output in the 28 countries of the European Union fell. Policy: U.S. inflation is blocked, and the Fed may still cut interest rates early. The European Central Bank may cut interest rates slightly several times. The Bank of Japan kept its benchmark interest rate unchanged at its April interest rate meeting and may cut bond purchases in the future. Risk warning: overseas monetary policy adjustment exceeded expectations
1
United States: Demand is not weak, inflation remains high
The economy of the United States is not bad. The annualized rate of GDP in the first quarter of 2024 was 1.6% (the previous value was 3.4%), which was lower than market expectations, but the year-on-year growth rate still picked up after excluding the base effect. And from a structural point of view, GDP growth is mainly dragged down by net exports, while consumption remains stable and investment has also improved. Overall, the U.S. economy remains strong in the short term.
Specifically, in terms of consumption, the consumption of goods has fallen, while the consumption of services is still strong. The rebound in private investment is mainly driven by residential investment, or related to the continued recovery of new home sales in the United States. Equipment investment has also rebounded, reflecting the potential for increased business investment confidence. The strong performance of imports led to a weakening of net exports, of which the growth in merchandise imports was more pronounced, which also reflected the weak demand from the United States. (For details, see "Demand is Not Weak - US GDP Review for Q1 2024")
At the same time, the growth rate of new home sales picked up. U.S. new home sales in March were 693,000, higher than market expectations of 669,000. The year-on-year growth rate increased significantly to 8.3% from 1.9% in February. In addition, the median price growth rate of new home sales also rebounded to 6.0% month-on-month (previous value -3.5%).
Household consumption also remained resilient. The year-on-year growth rate of personal disposable income in the United States in March was 4.1% (previous value 4.2%), which was still relatively stable. Personal consumption expenditure rebounded by 1 percentage point year-on-year to 5.8%, with both goods and services consumption growing, and household consumption still showing some resilience. Among them, the growth of commodity consumption is mainly driven by gasoline and other energy commodities, and the growth of service consumption is largely driven by health care.
Inflationary pressures remain high in the United States. The year-on-year growth rate of the U.S. PCE price index rebounded by 0.2 percentage points to 2.7% in March, which may be mainly affected by the recent rebound in energy prices. Core PCE was unchanged from February at 2.8%. It can be seen that US inflation is still "stubborn", and even excluding the interference of food and energy prices, the downward resistance to core inflation has not been eased.
In general, the United States is still more of a "inflationary" risk, the economy is stable, and there is no risk of "stagnation" for the time being, which is different from the "stagflation" environment.
In addition, new orders for core capital goods rebounded year-on-year. U.S. ex-defense durable goods orders rose 1.7% year-on-year and 2.3% month-on-month in March (previous value 1.5%). Among them, the growth rate of new orders for core capital goods excluding aircraft and defense rebounded by 0.8 percentage points year-on-year to 1.1%, and fell to 0.2% month-on-month from 0.4% in February.
The prosperity index fell slightly. The U.S. Markit manufacturing PMI fell to 49.9 in April from 51.9 in March, ending the trend above the boom and bust line for three consecutive months. The services PMI also fell back to 50.9 (previous value of 51.7), but it was still above the boom and bust line.
The market is expecting a rate cut in September. As of April 26, the market expects the Fed to cut interest rates for the first time in September, and it is expected to cut interest rates once this year, with an annual rate cut of 25BP.
Treasury yields recovered to 4.67%. As of April 26, the nominal yield on the US 10-year Treasury note was 4.67%, a further 5bp recovery from the previous week. Among them, the real yield on the 10-year Treasury note was 2.24%, up 3BP from the previous week, and the 10-year inflation expectation increased by 2BP from the previous week to 2.43%.
2
Europe: The economy continues to diverge
Manufacturing PMIs continue to weaken. The Eurozone Markit composite PMI rebounded to 51.4 in April from 50.3 in March. Among them, the PMI of the service industry continued to strengthen, rising by 1.4 to 52.9, and has been above the boom and bust line for three consecutive months. The manufacturing PMI fell further to 45.6 (the previous value was 46.1), and the divergence between the manufacturing and service sectors in the euro area continued.
The year-on-year growth rate of crude steel output declined. In March, the crude steel output of the 28 EU countries increased by -2.5% year-on-year, down 3.5 percentage points from February.
3
Policy: The Bank of Japan remains accommodative
Inflation has encountered obstacles, and the Fed may still be too early to cut interest rates. Chicago Fed President Goolsbee said the Fed had to readjust policy and pause to see what was going on after a series of higher-than-expected inflation data.
The European Central Bank may cut interest rates slightly several times. ECB Executive Board member Panetta said that the ECB can respond to weak demand by cutting interest rates several times, and can pause small rate cuts at no cost if there is a shock.
The Bank of Japan kept interest rates unchanged. The Bank of Japan maintained the benchmark interest rate at 0-0.1% at the April interest rate meeting, in line with market expectations. The Bank of Japan said that it expects the current accommodative financial conditions to continue, and it is necessary to pay attention to the impact of the exchange rate on inflation. Bank of Japan Governor Kazuo Ueda said that bond purchases will be cut at some point in the future, but it is not yet possible to say when the cuts will be made. The timing of interest rate hikes depends on the price trend, and the possibility that the exchange rate will affect the price trend cannot be ruled out, and the possibility of a long-term weakening of the yen is not zero.
Risk warning: overseas monetary policy adjustment exceeded expectations
---------------- Saudi Arabia: What are the investment opportunities ?—— Emerging Economies Research Series No. 9 (Haitong Macro, Li Jun, Wang Yuqing, Liang Zhonghua)
Rising to the Challenge: Haitong's Macroeconomic and Policy Outlook in 2024 (Haitong Macro Research Team)
Legal Notices
The content contained in this subscription account is only for the reference of professional investors of Haitong Securities, and is only for the exchange of research views in the context of new media. This subscription account is not a publishing platform for Haitong research reports, and customers still need to refer to the complete report officially released by Haitong Research Institute through the research report publishing platform. The market is risky, and investors need to be cautious. In any case, the information or opinions contained in this subscription account do not constitute investment advice to any person, and Haitong Securities shall not be liable for any consequences or losses arising from any direct or indirect use of the information and content published in this subscription account or investment based on it. The information, opinions and projections contained in this subscription account may no longer be accurate or invalid due to various factors after the date of publication, and Haitong Securities undertakes no obligation to update inaccurate or outdated information, opinions and projections without prior notice. The copyright of this subscription account belongs to Haitong Securities Research Institute, and any subscriber who pre-quotes or reprints the content contained in this subscription account must contact Haitong Securities Research Institute for permission, and must indicate the source as Haitong Securities Research Institute, and shall not quote or delete the content contrary to the original intention. Haitong Securities Research Institute Macro Industry reserves all legal rights to this subscription account (WeChat ID: Haitong Macro Research). Other subscription accounts registered by other institutions or individuals on the WeChat platform in the name of the macro industry of Haitong Securities Research Institute, or containing "macro team or group of Haitong Securities Research Institute" and related information are not official subscription accounts of Haitong Securities Research Institute macro industry.