Trade news continued to create a positive context this week. While few details are yet to emerge on the US-China deal, a deal is expected to be drafted and signed by early 2020. The USMCA was approved in Congress by a large majority and that deal now goes to the Senate for approval.
Data on US manufacturing conditions were mostly stable, with growth remaining low. The improvement in manufacturing industrial production for Nov was led mostly by the end of the GM strike. The prelim manufacturing PMI for Dec was little changed from Nov. The regional data for Dec was mixed, with the only deterioration reported in the Kansas City Fed survey. Philly Fed survey headline conditions worsened, but all the underlying indicators remained positive.
US consumer readings indicate that any weakness has yet to broadly spill-over into consumer metrics. Sentiment continues to increase, albeit led by the higher income groups. Income and outlays for the first two months of Q4 indicate stronger growth than in Q3. Services activity continues to grow. From last week, the labour market remained stable. JOLT’s data was mixed with weaker growth in hires, but a rebound in involuntary separations from the month prior. The growth in voluntary separations, quits, continue to slow – indicating a reduced willingness to voluntarily change jobs.
More broadly, the prelim PMI’s for Dec indicated a worsening in manufacturing activity in Europe/Germany, but offset by services activity.
In Japan, there appears to be little rebound so far after the Oct increase in the sales tax and weather disruptions. The prelim composite PMI for Dec indicated stagnant conditions – with a slight worsening in manufacturing activity. The Nov merchandise trade data remained weaker with exports and imports declining again. The decline in exports was broad-based. Similar to Oct, almost half of the decline in imports was attributed to a decline in petroleum imports, but declines in imports were still recorded across most commodity groups. Annual core inflation increased only slightly. The BoJ kept policy and rates unchanged, noting risks from external factors affecting the domestic economy.
The BoE kept rates on hold – although there were two votes to loosen policy further at this time. The PMI data reflected much weaker conditions in Dec as firms continued to work through Brexit uncertainty. Retail sales data is unclear because Black Friday promotion data in 2019 will fall into the Dec report. The labour market for Aug-Oct remains resilient. Progress on the approval of the EU Withdrawal agreement is underway with the bill passing its second reading. Some uncertainty is likely to remain regarding Brexit as PM Johnson amended the Brexit Bill such that there can be no extension granted to the UK-EU trade deal negotiations – with the deadline at the end of 2020.
Aus prelim PMI’s for Dec continued to show weaker conditions across both manufacturing and services. The labour market also remains resilient and there are some signs of stabilising employment growth.
More releases are covered in the weekly review for last week – download the full document here;
Comments and feedback are welcome – email me at kim.mofardin@marscapitalpartners.net.
Wishing everyone safe and happy holidays!
