Chart of the Day

Good news for those trying to do some home improvements, as lumber prices have finally eased. The spot price is still elevated from a historical basis, but is now down by 19% in the space of a few trading days. The futures curve has been in backwardation, i.e. with futures prices lower than the spot price, so traders have been anticipating some normalization of the price, as the supply constraints related to Covid eased.

Macro

In China, the data late on Sunday (US time) showed retail sales growth fell to 17.7% YoY in April, while industrial production growth decreased to 9.8% YoY. Those rates are still being boosted by base effects from the weak growth last year.

China’s money supply growth slowed to just 8.1% YoY, the lowest since the 8.0% recorded in February 2019. Aside from that reading, you have to go back decades to find a weaker growth rate.

With money supply growth slowing, China’s 12-month credit impulse is now neutral. The six-month impulse shows much of the slowing of credit has occurred recently.

In the US, NAHB homebuilder confidence was little changed to 83.0 in May. At that level, it suggests housing starts could drop back, perhaps due to high lumber prices.

The Empire State manufacturing survey fell to 24.3 in May, which could put slight downward pressure on the ISM manufacturing index this month.

In Japan, GDP fell by 1.8% QoQ in Q1, which resulted in YoY growth of -1.3%. The economy watchers survey is hardly great either.

Markets

China's 6-month credit impulse might be pointing to weaker commodity price growth, though it didn’t do at all well in predicting trends recently.

It was a weak day for the main cryptos yesterday. Bitcoin is currently down by 22.3% in the past month. Ethereum is still up by 55.9% in the past month, but heading in that direction.

Precious metals may be benefitting from the crypto correction. Silver in particular has been doing very well lately.

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