Important developments today:
1. U.S. industrial output continues to grow
2. Layoffs in the U.S. increase by 24,000 in last week
3. Chinese first quarter GDP growth comes in at 11.9% for the year
Treasury yields up slightly after regional manufacturing data. Treasury prices dropped marginally on Thursday, pushing yields a little higher, as U.S economic data sent mixed signals to the markets. Treasuries gained in early trading after the government said initial jobless claims jumped more-than-expected last week, bolstering the safe-haven appeal of government debt. Gains were reversed however, as a report showed manufacturing in the New York region expanded in April at a faster pace than anticipated. Yields on benchmark 10-year notes climbed less than one basis point to 3.87%, while 2-year note yields remained unchanged, to yield 1.05% according to BG-Cantor Market Data.
Separately, total net foreign purchases of U.S. Treasury notes and bonds amounted to $48 billion in February, contrasted with net buying of $61 billion in January, according to the Treasury Department’s TICs database. This represents a third consecutive monthly decline in foreign purchases of U.S. government debt. China reduced its Treasury holdings by $11.5 billion to $878 billion in February, posting a fourth monthly decline; but China remains the largest foreign holder of U.S. government debt. Japan, the second-largest holder, increased its stock of Treasuries from $765 billion to $768 billion in February, and Hong Kong’s portfolio increased $5.8 billion to $152 billion.
U.S. industrial output continues to grow. Manufacturing continued to perform well in the United States during March, with factory output up a solid 0.9% (m/m), posting a ninth consecutive month of gains. Total production (including utilities and mines) advanced at a more subdued 0.1% pace in March (m/m), according to the latest data from the Federal Reserve. Mining activity gained 2.3%, but output at utilities dropped by a sharp 6.4% in the month, as household consumption of energy, which had increased in response to harsh winter conditions through February, abated quickly with warmer March weather.
When these figures are viewed from a momentum perspective (i.e. at an annualized 3m/3m rate, or ‘saar’) total production gained 7.8% during the first quarter of 2010, down from an 8.9% advance in the final quarter of 2009. Once more, abstracting from the weather related vagaries of utility output, manufacturing (driving force for U.S. recovery) picked up to a 7.5% (saar) rate in the quarter from 5.6% at end 2009; a positive development moving forward.
And in related reports…the Empire State Survey conducted by the New York Federal Reserve showed manufacturing expansion in the New York region rising to a 6-month high in April. The Fed’s general economic index also climbed to 31.9 from 22.9 in March, a ninth consecutive month of growth, as businesses in New York boosted output to meet increasing consumer demand.
And the Philadelphia Fed’s survey showed factory output expanding at the fastest pace in 4 months. New orders jumped from an index reading of 9.3 in March to 14.6 in April, underscoring the increases in both U.S. domestic demand and exports.
Source: Labor Deparment
Initial claims surprise with a second weekly increase. New claims for unemployment insurance grew by 24,000 in the week ending April 9 to 484,000, the largest increase in claims in over two months. The 4-week average of claims a less volatile indicator, also moved upward by 7,000 to 457,750. The past two weeks have recorded the sharpest increases in layoffs since the February winter storms in the Northeast disrupted economic activity and led to a temporary spike in layoffs [see ]. The most recent increase in jobless claims was well above median market estimates for a 20,000 decrease. The Labor Department had noted last week that the early weeks of April are generally a volatile period for claims due to the moving date of the Easter holiday. The latest increase in layoffs is a sign of the continued difficult recovery in labor markets.
Among emerging markets:
In East Asia and the Pacific, China’s economic growth accelerated to 11.9% in the first quarter of 2010 (y/y), marking the fastest pace of growth in almost three years, according to data released by the Statistics Bureau today. Investment contributed 6.9 percentage points to GDP growth; consumption added 6.2 points, while net exports subtracted 1.2 percentage points. Consumer price inflation increased by 2.4% (y/y), much less than anticipated. This in turn, could make more difficult decisions by the authorities on when to raise interest rates. Meanwhile, industrial production increased 18.1% in March (y/y) down from 20.7% in the first two months of 2010. Retail sales jumped 18%, with auto sales surging 76% in the first quarter relative to the same quarter of the previous year.
In South Asia, India’s wholesale inflation rate held at 9.9% in March (y/y), a 17-month high, on strong consumer demand; this adds pressure on the central bank to raise rates.
In Latin America and the Caribbean, Argentina’s consumer price inflation accelerated to 9.7% in March (y/y), the fastest pace in more than three years, as prices rose 1.1% on the month, according to the National Statistics Institute