Macro review for w/c 24 September 2018 – As expected the US Federal Reserve increased the FFR by 25bps last week. A key change to the statement was the removal of “stance remains accommodative” but this did not signal a change in the path of policy. Projections for real GDP growth were upgraded in line with fiscal stimulus.
US data this week confirmed that real GDP growth in Q2 was 4.2% annualised and that inflation is not accelerating. In fact, core PCE price index growth slowed and came in at 0% in Aug. The annual headline rate also slowed slightly and remains around the Fed target.
Fixed mortgage rates continued to increase to new post GFC highs this week. Growth in house prices slowed. New home sales posted a slightly better month of growth after slowing for several months. From last week, existing home sales have declined over the last few months.
European inflation data continues to be led higher by accelerating energy prices. Prelim German and Euro-area CPI growth increased in Sept, coming in at +2.3% and +2.1% respectively. Euro-area CPI ex energy in the prelim estimate was +1.3% (annual).
Bank of Japan Governor Kuroda discouraged the idea that the BoJ might start to normalise rates. Governor Kuroda confirmed that extremely low rates will remain for an “extended period of time” meaning “a fairly long period of time”.
Brexit remains in a state of flux. Awaiting revised details of the trade component of Brexit, likely after the Conservative Party conference next week (from 30 Sep). UK GDP growth for Q2 was confirmed at +0.4% but Q1 growth was revised lower to +0.1%.
Expecting the US and Canada to announce details of an agreement on NAFTA early this week (Sunday). The US and Japan have agreed to commenced talks for a bilateral trade deal. The start of talks protects Japanese automakers from the threat of tariffs for now.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 24Sept2018
The outlook for w/c 1 October 2018 – Medium supply of treasuries this week with the US Treasury auctioning and settling $135b in ST bills and settling $106b in note auctions from last week (settlement 1 Oct). The US Treasury will raise approx. $22b in new money this week. The 4wk bill is yet to be announced.
It’s the start of a new quarter and the monthly cap for reinvestment of maturing securities on the Fed balance sheet increases to $30b for treasuries and $20b for MBS. These are now the maximum cap levels and are not scheduled to increase further.
A big data week;
PMI’s for Sept will be released for the US, Asian and European economies.
US jobs data.
A heavy schedule of US Fed speeches, including Chairman Powell.
Australia RBA rates decision and retail sales.
Expecting an announcement on a NAFTA agreement between the US and Canada early in the week.
Brexit – the new form of the trade component of the Brexit withdrawal agreement will likely be announced after the Conservative party conference this week. Less than 4 weeks remain to negotiate the Irish border backstop and the broader trade element of the withdrawal agreement.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
