The macro review for w/c 14 January 2019; A much quieter week on the central bank front. Both key speeches this week by ECB President Mario Draghi and NY Fed President John Williams reiterated the central banks’ commitment to deploy their policy tools “if and when” it is needed. In other words, confirming that the central banks will be there to step in if needed.
For the most part, US data was good this week. Several key reports are missing due to the ongoing government shutdown. While the NY Empire State Manufacturing Survey weakened, the Philadelphia Fed Business Outlook Survey showed a stronger result on the back of growth in new orders. US Industrial production growth grew at a constant pace in the month as utilities output declined due to warmer than expected weather. The manufacturing component of industrial production was much stronger than recent US manufacturing data had suggested – an upside surprise for the month.
US housing had some good news as mortgage applications increased at a faster rate last week, to be +11% on the same week a year ago. At the same time, the prelim reading on consumer sentiment in Jan recorded a large fall in current sentiment and expected conditions.
Eurozone growth was dealt another blow with industrial production declining in Nov. Declines in production were recorded across many Eurozone countries and across the major production categories of intermediate goods, capital goods and consumer goods. The EU trade balance also deteriorated in Nov and in the YTD as key export growth continued to underperform and import growth increased at a faster rate, led by categories such as energy.
Earlier in the week, Chinese trade data for Dec confirmed that both exports and imports had declined in Dec versus a year ago – an important development underpinning some of the global production and trade weakness.
CPI’s were released across several key economies. Generally, slower growth in energy prices resulted in lower headline growth of the CPI – except in Canada where headline CPI growth accelerated higher in Dec despite slower growth in energy prices (likely to be an issue for the BoC if that trend continues). Measures of core inflation across Germany, the EU, the UK, and Canada all remain stable. The BoJ’s preferred measure of core CPI in Japan (CPI ex-fresh food) slowed even further in Dec. The lower inflationary pressure will give central bankers room to keep policy accommodative as this ‘slower growth’ environment develops.
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 21 January 2019; Of most interest this week will be the Jan prelim PMI’s for the major economies. This should provide some insight into whether production and export weakness has extended into 2019.
The ECB and BoJ hand down interest rate decisions this week – no change is expected. It’s possible the BoJ will revise inflation forecasts lower. As the US Fed will be on board next week, the blackout period for communications is in effect.
US data flow will likely continue to be interrupted by the Government shutdown and this week we will miss the US Durable Goods and New Home Sales reports for Dec. We will get further reads on regional manufacturing activity in Jan from the Richmond Fed and Kansas City Fed.
Very light treasury supply this week. The US Treasury will settle $151b in ST bills, paying down $9bn.
Labour market surveys for Dec will be out for Australia and the UK this week. This will be an important indicator for the Australian economy as the housing market continues to decline and Chinese growth continues to slow.
After the large defeat of the Brexit Article 50 vote last week, PM May outlined her plan B for Brexit to the UK Parliament on Monday. This mostly consists of the UK seeking further concessions from the EU – something that has already been rejected by the EU.
The next stage of US-China trade negotiations will continue next week. Expecting headline risk to remain elevated.
US earnings announcements will continue this week.
Further detail and a calendar of key releases are provided in the briefing document – download it here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
