The macro review for w/c 5 November 2018 – As expected, the FOMC kept rates on hold. There was little change to the accompanying statement. US data out this week confirmed the continued strength of economic activity. Growth in services activity remains close to near term highs and the services PMI grew at a faster pace. JOLTS data pulled back slightly, but job openings and hires remain close to all-time highs. Producer prices for final demand accelerated higher on the back of higher growth in energy, food and services prices.
US consumer credit growth was lower in the current month, but higher overall in the third quarter. Non-revolving credit drove overall consumer credit growth higher on the back of a pick up in both motor vehicle and student loan growth.
The EU rejected the UK compromise to resolve the Irish border backstop issue – both sides have not agreed on the implementation. There is still some possibility for negotiation, but its becoming unlikely that a deal will be ready in time to call a special EC meeting in Nov. Despite the uncertainty, UK data remains resilient. UK Q3 GDP grew at a faster pace driven by higher export growth and continued growth in household and government consumption. Some underlying signs of growth slowing throughout the quarter. This was also highlighted by the slower growth in the UK services PMI. New orders and some areas of consumer spending were weaker.
German industrial production was somewhat stronger than the manufacturing PMI had suggested – with production growing ahead of last year in the latest month. But slower growth/declines in new manufacturing orders, especially from overseas and the decline in manufacturing turnover were in line with the weaker momentum outlined in the Sep and Oct PMI’s.
Mixed data on Japan. Services PMI improved in Oct. The Japanese trade balance improved in the Sep month, but that was due to declining exports and mostly due to a larger slow down in imports. Slightly different on a quarterly basis as the trade surplus shifted to deficit in Q3 (Yen basis) – export growth slowed and imports grew at a faster rate. Machinery orders for Sep fell very hard – it’s also a volatile dataset. Will need to see how industrial output/activity responds in Oct and Nov, given the improvements in PMI’s.
The data on Aus housing continues to deteriorate. Overall lending for housing was down 14% from a year ago. The weekly auction clearance rates continue to fall. The RBA kept rates on hold as expected. Despite the likelihood of further falls in house prices, the RBA increased growth projections for 2018/19.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here (hit the back button on your browser to return to the site);
The outlook for w/c 12 November 2018 – A heavy week of treasury issuance with the US Treasury settling $247b in bill, note and bond auctions this week and raising $59.6 in new money. Its also mid-month and approx. $17b in Fed holdings of securities will roll off the Fed balance sheet. The date to watch is 15 Nov.
Several US FOMC member speeches this week including Chairman Powell.
US data this week; CPI, retail sales, industrial production and regional surveys. Looking for activity to confirm the continued path of rate increases.
Important European data is out this week, especially given the recent weaker data; CPI, Q3 GDP and industrial production. ECB President Draghi is also scheduled to speak. At the end of Dec (next month) the ECB is scheduled to finish net asset purchases (currently running at €15b). German Q3 GDP and CPI will also be released this week – providing some insight as to the impact of slower industrial production on the broader German economy.
With Brexit uncertainty continuing to increase and the pockets of slightly weaker UK data last week – this week will provide an important read on the resilience of the UK consumer with retail sales, the labour market and CPI.
The Australian labour market report for Oct will be out this week also – something to keep on the radar given the slow-down in housing.
Further detail and a calendar of key releases is provided in the full briefing document – 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
