Lumber prices fell to a new 2022 low and extended 5-week drop to 40% as demand for renovation plunges. Supply also improved from saw mills after railcar bottlenecks were solved in western regions. The price fell 6% to $829 per thousand board feet following 8.4% fall a day ago. The DIY market, about 40% of the lumber demand, has been struggling as home owners are battling higher energy prices.
U.S. ceramic tile consumption in 2021 increased 9,9% in a year after falling for two years in a row. The 3.1 billion square feet of demand was driven by gains in the U.S. housing and construction markets and overall robust economic growth, according to the tile industry association. U.S. imports reached their highest level in fifteen years comprising 74% of total with 22% share held by Spain.
Farmers are bracing for another round of price hikes in fertilizers, diesel, and natural gas. Fertilizer prices rose 60% in 2021. Nitrogen fertilizers rose 95% and potash fertilizer prices surged 70%. Additionally, only two U.S. companies supply fertilizer potash and four supply 75% of fertilizer nitrogen. Moreover, the latest sanctions on Russia and Belarus have hampered potash imports.
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DE CF MOS
Russia's economy is expected to contract at least 10% in 2022 according to domestic news agency RIA. The decline in economic activities will be the largest since the fall of the Soviet Union in 1991. The economy expanded at 4.7% in 2021 and was estimated to grow in 2022 at 3% rate prior to the invasion of Ukraine. Russia is facing soaring inflation, Western sanctions, and capital flight.
Consumer price index in March rose 8.5% from a year ago driven by the high cost of energy, food, and shelter. Energy prices soared 32% and food prices increased 8.8%. Core inflation which excludes food and energy rose 6.5%. For the month, core inflation increase ebbed to 0.3% after rising at 0.5% in February. Shelter costs rose 5% from a year ago and gained 0.5% in the month.
Seasonally adjusted weekly initial claims of unemployment were 166,000 in the week ending April 2, the lowest since November 1968. The claims declined 5,000 from the previous week's claims of 171,000, revised down 31,000 The 4-week moving average was 170,000, down 8,000 from the previous week's revised average. The seasonally adjusted insured unemployment rate was 1.1% in the previous week.
Fed officials are leaning towards a higher rate increases and have agreed on a plan to shrink holdings of $9 trillion of U.S. bonds. After years of denying rising inflation as transitory, Fed officials are ready to roll over $60 billion of U.S. treasury bonds and $35 billion of mortgage securities a month phased over three months beginning in May starting with the shortest term holdings.
Rising interest rates are wreaking a havoc in mortgage industry and may indicate a slowing housing market in the coming months. Total mortgage volume declined another 6% last week and plunged 41% from a year ago. Applications dropped 10% in the week and plunged 62% from a year ago. The average 30-year contract interest rate increased to 4.9% last week from 3.36% a year ago.
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PFSI WFC GHLD
U.S. corporations continued to add jobs on the sustained post-pandemic labor market recovery. Nonfarm payrolls increased 431,000 in March and the unemployment rate declined to 3.6%. Revisions also suggested a stronger trend in place with January additions were revised higher 23,000 to 504,000, February jobs were up by 77,000 to 750,000. For the quarter new additions were 1.69 million.
Weekly initial jobless claims increased 1to 202,000 for the week ended March 26, and increase of 14,000 from the previous week, according to the Labor Department. Continuing jobless claims reached a record high of 6.2 million in April 2020 and have now declined to 1.3 million, the lowest since December 27, 1969. Nonfarm payroll report on Friday is expected to show a smaller increase than in Feb.
Consumer spending growth slowed in February after the rising gasoline prices and surging rent forced consumers to cut other expenses. Spending rose 0.2% in February and January spending increase was revised higher to 2.7% from 2.1%. The personal consumption expenditure index increased 0.6% in February, an increase of 6.4% from a year ago, after rising at 0.5% in January.
High natural gas prices are likely to trend even higher as the U.S. regulators prepare to divert natural gas to Europe because additional supplies from Qatar are expected to lag till 2023. Russia is implementing ruble payment demand for imported natural gas. Germany, Holland, Greece, and Italy are making emergency arrangements in the event of supply interruptions.
Private sector added 455,000 jobs in March following revised 486,000 in February and totaling 1.45 million the first quarter, according to ADP monthly survey. Travel and hospitality added 161,000, education and health services added 72,000 and business services expanded by 61,000 net new jobs. Manufacturing added 54,000 jobs followed by construction adding 15,000.
The largest military budget in the world is likely to get even larger according to the latest budget proposal from the U.S. president. Of the $5.8 trillion budget proposed by President Biden, $795 billion is for military spending, higher than $770 billion in 2022, and $915 billion for domestic programs with the remainder for mandatory spending.