In April, global markets exhibited a noteworthy recovery. With the exception of U.S. REITs, which experienced a slight decline as the second quarter began, all major asset classes recorded gains last month, building on the substantial rally of March. Commodities, in particular, led the charge; the Bloomberg Commodity Index soared by 8.5% in April, marking the most significant monthly rise in nearly six years. This rebound in commodity prices also signifies the second consecutive monthly gain for raw materials, a first in two years.
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● U.S. Personal Income Increases More Than Anticipated in March | RTT
● U.S. consumer spending growth decelerates in March despite rising incomes | LA Times
● Consumer sentiment in the U.S. falls slightly in April | CNBC
● Labor costs in the U.S. see moderate increases in Q1 | Reuters
● Chicago PMI drops to 50.4 in April, nearing stagnation | MarketWatch
● Manufacturing growth in the Eurozone remains sluggish; French downturn deepens | Markit
● China’s Manufacturing PMI unexpectedly declines in April as stimulus measures start to fade | MarketWatch
● Listen Closely for Signs of the Next Global Recession | NY Times
● The Power of a Single Number: A Political History of GDP
By Philipp Lepenies
Summary via publisher (Columbia University Press)
Since its prominence in the mid-twentieth century, GDP (Gross Domestic Product) has emerged as the foremost statistical gauge of national progress and development. Virtually every government upholds GDP growth as a crucial economic objective. Despite growing criticism of this metric, its significance remains undisputed in our political landscape. In “The Power of a Single Number,” Philipp Lepenies chronicles the dynamic history of GDP’s political acceptance and eventual ascendancy, tracing its origins to Renaissance England and examining the societal and political factors that initially hampered its adoption.
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The focus is now on employment. In reality, it has always been about jobs. However, the stakes are higher now than they have been since the conclusion of the Great Recession, especially after the recent disappointing GDP report for the first quarter.
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● U.S. Economy Grows by 0.5% in Q1, the Slowest Rate in Two Years | Bloomberg
● Jobless Claims in the U.S. Rise, Yet Remain Historically Low | WSJ
● Consumer Confidence Rebounds in the U.S. Last Week | Bloomberg
● Kansas City Fed Manufacturing Index Still in Negative Territory, Yet Marks Two Months of Improvements | 24/7 Wall St
● Eurozone Q1 GDP: +0.6% – Exceeding Expectations | Eurostat
● Obama Considers His Economic Legacy | NY Times
● Is OPEC Planning for the End of the Oil Era? | Nation
The first quarter of this year proved challenging for U.S. economic growth, as revealed by the Bureau of Economic Analysis (BEA)’s recent estimate. The initial release of the Q1 GDP report indicated a feeble gain of 0.5% (seasonally adjusted annual rate)—far less than the already anemic growth of 1.4% recorded in the previous quarter. A significant contributor to this slow progress is reduced consumer spending.
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The Federal Reserve opted to keep interest rates steady yesterday, as was widely anticipated. Nevertheless, the prospect of a rate increase in June lingers… perhaps. “The latest [FOMC] statement does not strongly advocate for a June rate hike,” notes Bill Irving, a portfolio manager at Fidelity, in a statement to Reuters. Meanwhile, the Treasury market is sending mixed signals. On one hand, yields declined, likely in anticipation of a weak first-quarter GDP report. On the other, inflation expectations in the Treasury market have risen to the highest levels observed since last summer. This combination creates a perplexing mix of market signals.
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● The Fed Shows No Urgency to Raise Rates as Economy Faces Challenges | Reuters
● Forget June; It’s More Likely the Fed Will Hold Off Until December | CNBC
● U.S. Pending Home Sales Up by 1.4% to Reach a Ten-Month High in March | MarketWatch
● Mortgage Applications in the U.S. Decrease by 4.1% Last Week | HousingWire
● Bank of Japan Surprises Markets by Voting Against Further Stimulus | Guardian
● Long-Term Investors Should Be Cautious | Bloomberg
● Is Gold More Productive Than Cash? | Merk Investments
The Federal Reserve is widely anticipated to maintain its interest rates at the current level today. However, the decision to hold the target federal funds rate at a mildly positive range of 0.25%-0.50% could be viewed as a minor victory in the context of today’s global monetary policies. While keeping rates slightly above zero might symbolize a dovish stance in the broader history of central banking, the Fed’s current approach appears relatively hawkish compared to the negative rates emerging in other parts of the world.
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● Orders for U.S. Durable Goods Rose Less Than Expected in March | Bloomberg
● Consumer Confidence Index in the U.S. Declines in April | MarketWatch
● PMI: Growth in the U.S. Service Sector Remains Lackluster in April | Markit
● Richmond Fed Manufacturing Survey Indicates Continued Expansion in April | Richmond Fed
● U.S. Home Prices in 20 Cities Increased in February | CNBC
● U.K. GDP Growth Slows to 0.4% in Q1 | Guardian
● Trump and Clinton Steadily Approach Nomination | NY Times
### Conclusion
In summary, the economic landscape experienced varied developments in April, with most asset classes showing positive movement despite a backdrop of mixed signals in consumer confidence and spending. Policymakers remain vigilant regarding employment and inflation as they navigate the complex global environment ahead.
