by Kim | Feb 25, 2019
The weekly macro brief for w/c 25 February 2019 – Several key events will be in focus this week;
1.US President Trump will meet with North Korean Supreme Leader Kim Jong-un in Vietnam. While not directly related to the markets, headlines could impact sentiment.
2. US Fed Chairman Powell will provide testimony on monetary policy to the US Senate over two days.
3. USTR Lighthizer will also provide testimony to the House Ways and Means Committee on the progress of trade talks. Progress on US-China talks will be of interest as well as any possible commentary regarding the s.232 investigation.
4. Brexit – although the meaningful vote was postponed until 12 Mar, there could still be a vote this week that results in a delay to Brexit if an amended deal is not completed by 13 Mar 2019.
It
will be a big week of data for the US. Of most interest will be Q4 GDP and
Personal Consumption Expenditure and price data. Housing data will also be
released including house prices, pending home sales and housing starts. US
manufacturing will remain in focus – ISM manufacturing PMI for Feb, final
Markit manufacturing PMI for Feb, durable goods orders (full report) and regional
manufacturing surveys.
US
Fed speeches will feature heavily throughout the week including a further
speech by Chairman Powell later in the week.
There
will be heavier supply of treasuries settling this week with the US Treasury
settling approx. $319bn in bills, notes and TIP’s. Its also month end and
approx. $12.3bn in securities on the Fed balance sheet will mature of which
$5.82bn will be reinvested.
There will several other important data releases this week, as we continue to track slower manufacturing and production activity;
PMI’s
for China, Canada and UK manufacturing for Feb as well as the final
manufacturing PMI for the Eurozone for Feb.
Japan industrial production data for Jan and final manufacturing PMI for Feb.
More detail is provided in the full briefing document – you can download the file here;
Key releases from w/c 18 February will be incorporated into the Macro Review for w/c 25 February.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Feb 18, 2019
The weekly macro review for w/c 11 February 2019 – Weaker industrial production and external trade were key themes this week.
Key industrial production reports were weaker with output
declining in Japan (Dec), the EU (Dec) and the US (Jan) in the month. Output in
Japan and the EU fell below output levels from a year ago. The decline in
production in the US was led by an 8.8% fall in motor vehicle and parts
production.
GDP reports for Germany and Japan confirmed the weaker state
of external demand late in 2018. Germany narrowly missed a technical recession
as net exports likely detracted from growth. Growth rebounded in Japan in Q4,
but the year on year result was such that annual GDP growth in Q4 slowed to
-0.01%. The external sector also detracted from growth.
The EU goods trade balance for Dec and the full year 2018 trade
balance confirmed the broadly weaker trade position. Goods exports declined in
Dec while imports grew. In the full year of 2018, exports grew at a slower rate
than imports. The detail highlights that growth of the largest export product
group, machinery and vehicles, finished the year at +1.8%, lagging total goods
exports growth of 4% for the year.
The question facing both Europe and Japan is whether the US
will place a 25% tariff on car and truck imports. President Trump was scheduled
to receive the final report into tariff recommendations from the s.232 National
security investigation into car and truck imports by 17 Feb. The President has
90 days to review and action. President Trump has previously assured the EU and
Japan that no additional tariffs will be levied while trade negotiations are
underway (about to get underway).
UK Q4 GDP highlighted that Brexit has likely put a brake on
business investment decision making amid a weaker external sector (net trade
also detracted from growth in Q4) resulting in slower overall growth.
Consumption remains resilient and growth in retail sales accelerated in Jan.
Growth in the CPI slowed as energy prices declined.
The large magnitude % decline in US retail sales for Dec was important. While the report was weak (growth in autos was offset by declines in spending across all other categories), the broader context of the data makes it difficult to say whether this is the start of a trend in slower consumption. The decline in retail sales is inconsistent with the consumer credit data that was released last week for the month of Dec. Whilst revisions to data will be possible next month (consumer credit or retail), the Jan retail data will likely still be impacted by the partial govt shutdown. The weaker motor vehicle sales for Jan (released last week) will also likely weigh on next month’s retail result.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 18 February 2019 – Later in the week we get our first view of Feb private sector manufacturing and service activity with the prelim Feb PMI’s to be released for the US, Eurozone, and Japan.
It
will be a short week in the US – the focus will be on the FOMC minutes and
especially comments around the balance sheet size and the interest rate regime.
Durable Goods Orders for Dec will be released as well as the latest housing
market index (Feb) and existing home sales data (Jan). As we move into
reporting Feb data for the US, it will be interesting to see any impact on data
from the end of the partial government shutdown and the pivot by the Fed to
hold off on further rate hikes.
Several
Fed speeches are so far scheduled for Friday – topics include “the future of
the Federal Reserve’s balance sheet”.
The
US-China trade talks continue this week – USTR Lighthizer and Vice Premier Lui
He will meet again in Washington as the 1 March deadline approaches.
US
treasury supply will be much lighter this week, with the US Treasury settling
approx. $169bn in ST bills and raising approx. $12bn in new money.
In
Australia, the Wage Price Index for Q4 will be released along with the Jan
Labour Force Survey results. Both will be crucial inputs for the RBA decision
on interest rates.
Also of note this week will be the UK Labour Force Survey and Canada Retail Sales for Dec.
More detail is provided in the briefing document – you can download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Feb 11, 2019
The macro review for w/c 4 February 2019 – Growth downgrades were announced during the week by the EC, the BoE and the RBA.
The EC lowered growth forecasts for Euro area GDP; +1.3% in
2019 and 1.6% in 2020 (Autumn Forecast: 1.9% in 2019; 1.7% in 2020). Italy is
already in recession and there is a risk of Germany also falling into recession.
The EC maintains that “Europe’s economic fundamentals remain solid”.
The BoE kept rates on hold. Brexit remains the largest
near-term risk with rising uncertainty about the form of Brexit. This is acting
as a headwind to business decisions and the BoE has reduced growth forecasts.
The UK services PMI reflects the impact of increasing uncertainty of Brexit on
business decision making.
The RBA also kept rates on hold. Importantly, the RBA has
shifted from its tightening bias (“next move in rates likely to be up”) to a
more neutral bias – “the next move could be up or down”. This reflects concerns
regarding the domestic housing market, consumption and global growth. The RBA
downgraded economic growth from the “3.5% average” to 2.5% in June 2019 and then
back up to +3% by the end of 2019. For the RBA, negative shifts in the labour
market will likely be the key for rate cuts.
Comments by US San Francisco Fed President, Mary Daly, late
in the week sparked the interest of the markets, saying that the US Fed balance
sheet could be used to “generate more stimulus than it could achieve by just
cutting rates” (rather than just using the balance sheet in emergency situations).
This was broadly interpreted as “QE for
ever”.
US agencies are starting to catch up on the reporting
backlogs. Factory orders, shipments and inventories were weak in Nov – driven
by falls in non-durable goods (petroleum products) orders, shipments and
inventories. International trade data also suggests that lower oil prices may
have impacted the headline trade result. But the price-adjusted import data
shows a broader slow-down (but not decline) of growth, especially since Oct.
Both PMI reports into services for Jan indicated slower growth – which could be
an effect from the partial government shutdown. The Jan motor vehicle sales
data was very weak.
Weaker consumer data was recorded in the EU and Australia
for Dec. EU retail sales (vol) fell in Dec across a broad range of categories,
reversing the stronger gains in Oct and Nov. Aussie retail sales growth was
marginal at best in vol terms and down in value terms. The shifting holiday retail
calendar outside of the US has been bringing sales forward into Nov, but this
was still a weak retail result for Australia. The Aus Services PMI also fell
hard in Jan suggesting further weakness, especially in retail.
So far, much of the data around the ‘growth slowdown’ has been reflected in slower growth in production/manufacturing and exports, with weakness emanating mostly from Asia/China. PMI’s throughout Asia and Europe have been indicating slower growth in output and new orders while backlogs decline. For the most part, this weakness has yet to be reflected in consumer-based data. Some retail reports are starting to weaken, and we’ll get a better handle on that in the next few weeks. US data will be harder to evaluate given the possible impact of the partial govt shutdown. For example, US auto sales decline sharply in Jan during the shutdown. PMI’s are just starting to hint at weaker growth in employment – but most labour market reports remain quite strong.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 11 February 2019 – The focus this week will be on economic growth data.
On
the back of EC downgrades to growth, Germany and the broader Eurozone Q4 GDP (prelim)
will be released this week. Germany Q3 GDP declined by -0.2%. The German Office
of Statistics released an early forecast indicating that Germany would likely
avoid a technical recession.
Japanese
Q4 GDP will be released this week and all eyes will be on whether a technical
recession will be avoided there too.
There has at least been a somewhat stronger rebound in activity since
the Sep weather related disruption.
We
will get a broad view of the performance of the UK economy amid the ongoing
Brexit impasse – with retail sales, Q4 GDP and CPI out this week. There will be
further meetings between EU and UK negotiators this week, but little hope of
changes to the withdrawal agreement.
In
the US, CPI, PPI, retail sales for Dec and business inventories will be
released along with the first read of consumer sentiment for Feb.
There
are two notable US Fed speeches this week – including Chairman Powell and
Atlanta Fed president Bostic giving a speech at the European Financial Forum on economic outlook and
monetary policy in Ireland.
The
US-China trade talks continue at the end of the week with US Treasury Secretary
Mnuchin and USTR LIghthizer travelling to Beijing for talks.
US Treasury supply will be heavy this week, with an additional $50bn Cash Mgt Bill to settle on Mon 11 Feb. This week, the US Treasury will settle approx. $303bn in ST bills, notes and bonds, raising approx. $89bn in new money (incl the $50bn CMB). Its also mid-month and $43bn in US Fed holdings of Treasury securities will mature this week. Of that total, approx. $20bn will be reinvested.
The next deadline for US government funding is this week – 15 Feb.
More detail is provided in the briefing document – you can download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
