The weekly macro review for w/c 4 March 2019 – Slower growth remained a key theme last week. Sentiment also soured as the US-China trade agreement now seems further away than most expected. Reports are that the March summit has been postponed. Brexit negotiations also failed to deliver a solution to the Irish border backstop issue.
The ECB officially shifted its guidance for rate increases out to at least the end of 2019 and growth forecasts for 2019 were materially lowered with the outlook weaker than expected. The growth forecast for 2019 now equals the current annual GDP growth rate for the Euro Area +1.1%. The ECB also launched a new TLTRO program to commence in Sep. At the same time, German factory orders decreased in Jan but Dec results were revised higher – something positive to watch. Eurozone retail sales growth also rebounded in Jan across most categories.
The Bank of Canada kept rates on hold. The BoC highlighted that Q4 growth was much weaker than the bank had forecast back in Jan. The slowdown was much broader than just oil-related areas of the economy. With core inflation steady, rates likely remain on hold in the near term.
The RBA also kept rates on hold. Aus GDP growth slowed further in Q4 to +0.17% after the ‘surprise’ slowdown in Q3. The RBA’s central forecast for 2019 growth is currently 3%. Retail sales growth remained subdued/marginal in Jan and the Service PSI indicates continued weakness in retail for Feb. Forward indicators of employment growth show some moderation in employment growth.
US labour market data was a key focus this week. Reported job cut announcements increased further in Feb, with an emphasis on industrial goods and retail. Hiring announcements were much lower. The non-farm payrolls growth slowed significantly bringing the average growth lower. From the household survey, employment growth continued to slow but that growth remained larger than the growth of the labour force, resulting in total unemployed persons declining further on an annual basis.
The unemployment rate declined in Feb to 3.8% from 4% in Jan as a result of a lower total number of unemployed persons. The data likely still reflect some impact from the shutdown – with unemployment higher previously due to the classification of furloughed federal employees as on ‘temporary layoff’.
US services PMI’s indicated a faster pace of growth (consistent across both ISM and Markit reports) – the underlying drivers were positive. Markit quotes that firms were unsure that current demand conditions could be sustained.
Trade data from China continued to disappoint for Feb coming in much lower than expected. Chinese credit growth also came in much lower than expected, but aggregate financing for Jan plus Feb is still well above last year but will take time to flow through to activity. The Caixin Services PMI weakened markedly in Feb.
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 March 2019 – Important data is out this week as we continue to track the effect of the US government shutdown on Q1 activity and whether/how much the broader global slowdown in manufacturing and trade is affecting the US;
US Jan retail sales will kick the week off after the much weaker result for Dec. Consumer sentiment fell in Jan and this could be a driver of spending decisions.
US Durable Goods and Industrial Production reports are also out this week.
Other reports out this week should provide insight into the impact of the global slow-down in trade and manufacturing on other key economies;
Industrial production reports this week for Germany, the Eurozone,
CPI will be reported for the US, Germany and Europe.
We will also track for indications of Chinese stimulus starting to impact activity. This week China retail sales and fixed asset investment will be reported.
Australia housing lending data for Jan will be released this week – as we continue to track the fall in house prices.
Central banks; BoJ rates decision and introductory remarks from US Fed Chairman Powell.
Much heavier supply of treasuries this week. The US Treasury will settle approx. $260bn in ST bills, notes and bonds this week raising approx. $75bn in new money.
It is an important week for Brexit as there are only several weeks left until the 29 Mar Brexit deadline. The meaningful vote scheduled for 12 Mar will possibly become a ‘provisional’ vote. If defeated, there is likely to be a vote on a no-deal Brexit followed by a vote on requesting a delay to Brexit. This will unfold throughout the week.
The US-China trade negotiations continue.
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
