The weekly macro review for w/c 22 April 2019 – US GDP growth accelerated higher in Q1. The underlying drivers of growth provide a mixed message on economic activity. Growth was higher on the back of faster export growth, coupled with declining imports (higher net exports), and a continued increase in the change in inventory. Personal consumption growth and private fixed investment spending growth both halved.
The inventory build has been observed across several reports over the last few months especially within retail and wholesale channels, as sales growth slowed. An important point is that consumer retail sales, including motor vehicle sales, improved in Mar. If this higher growth in consumption can be maintained, then the inventory build may dissipate over the next few months. Growth in personal consumption expenditures, retail sales, and motor vehicle sales will be important data points to watch over the next few months.
One feature of the two regional surveys out this week for Apr was the weaker growth in employment and/or hours worked. The Richmond Fed manufacturing survey highlighted a weak rebound in activity – with a further notable increase in inventory for Apr and fall in the average work week – the largest decline since 2008.
US consumer sentiment for Apr continued the sideways move, but consumers remain upbeat about financial prospects in the year ahead.
The BoJ sounded an alarm on the economic outlook in Japan due to global uncertainties and the planned tax hike in Oct. The bank announced plans to expand the range of eligible collateral for lending and clarified its forward guidance that low rates will be maintained until at least Spring 2020. On cue, prelim industrial production declined sharply in Mar – in line with the weaker result indicated by the manufacturing PMI for Mar. Retail sales growth was stronger in Mar and recorded the first small acceleration in annual sales growth.
Australian CPI surprised to the downside with growth in the quarter at 0%. Annual price growth, including measures of core CPI, continue to trend further below the RBA target range. Both domestic and external factors are contributing to the lower price growth in the quarter and the year.
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 29 April 2019 – A big week of US data, with the FOMC rates decision, employment, and non-farm payrolls and PMI’s for Apr.
Personal Income and Outlays and the PCE price index data will round out the Q1 view of consumption activity. We’ve been tracking slower spending growth and higher savings rates so far in 2019, with stronger growth in retail sales in Mar.
Another data point to watch this week will be whether the higher growth in US motor vehicle sales has continued in Apr.
PMI’s for China manufacturing, and services activity will be released this week – looking for whether the recovery in activity has continued into Apr.
UK – BoE rates decision due this week along with the PMI’s for Apr. This will provide an early insight into the impact on the UK economy, so far, of postponing Brexit (after preparations were put in place for 29 Mar exit). Talks between the UK Government and the Labour party will continue this week, but it is unlikely that there will be another vote in Parliament on Brexit this week.
Q1 GDP for the Eurozone will be released along with the final PMI’s for Apr. Prelim data, especially for manufacturing activity showed continued weakness across the Eurozone into Apr.
US Treasury supply will be heavier this week. The US Treasury will settle approx. $310bn in ST bills and notes, raising approx. $37bn in new cash this week (after several weeks of paydowns). It’s also month end and $31.7bn in securities on the Fed balance sheet will mature and approx. $1.9bn in principal payments will be reinvested. Next month, the cap on reinvestments will be lowered to $15bn until the end of Sep 2019.
Trade talks between the US and China continue this week with plans to finalise details of a trade deal. At the same time, awaiting further details on the next round of talks between the US and Japan, as well as the commencement of talks between the US and EU.
More detail (including a calendar of events) 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
