by Kim | Dec 17, 2018
Macro review for w/c 10 December 2018 – US data out this week was positive and likely supportive of another hike in Dec. JOLTS data highlighted that job openings and hires remain close to respective recent peaks, while layoffs and discharges were unchanged in the month and remain at low levels. Headline PPI and CPI growth eased on lower energy prices. Core PPI remained elevated (and is now above the headline rate) and core CPI grew at a slightly faster rate (and is now growing on par with the headline rate), suggesting underlying inflation pressure remains. Even though retail sales growth slowed in Nov, spending growth remained elevated. Retail sales were also revised higher for Oct.
US industrial production (IP) was stronger in Nov led by mining and utilities- annual IP growth now at +3.8% just shy of the high point for the year. Manufacturing industrial production has been flat to down over the last two months and annual growth has slowed to 1.8%. Prelim PMI for Dec indicate slower growth across services and manufacturing.
The UK is in a deadlock over Brexit. The key vote on the withdrawal agreement was postponed during the week and the way forward for the UK is unclear. Data out this week indicated resilience in the economy despite the Brexit disruption. The labour market survey showed improved employment growth, while participation increased. Unemployment has started to increase somewhat over the last two quarterly reports. The monthly GDP growth slowed slightly.
Growth concerns remain within Europe. The ECB rates decision this week was as expected – key rates remain on hold while confirming that net asset purchases will end this month. The ECB assessment of current conditions confirm concerns over weaker external demand and country/sector specific issues but are offset by stronger domestic demand. GDP growth targets were revised slightly lower. While industrial production growth stabilized in Oct, the prelim PMI’s for Dec indicate continued weaker growth.
Q3 GDP decline in Japan was revised lower, but there are signs of a stronger end to the year. Prelim Manufacturing PMI for Dec stabilized even though new export orders continued to decline. The final industrial production data for Oct confirmed a stronger rebound after the weaker lead up to Sep. Forecasts are for continued growth in industrial production in Nov & Dec.
In Australia, the house price index confirmed that National house prices declined at an accelerated pace in Q3 at -1.9%. This was the second consecutive annual decline house prices at a National level. Despite a small rebound in housing finance in Oct, bigger picture declines in housing credit remain in place. Syd and Melb so far leading the way with the bigger declines in credit.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 17 December 2018 – The main event for this week will be the US FOMC meeting. At this stage, the probability of a rate hike is high at 77%. The FOMC statement/press conference will be of interest as we look for indications of what to expect in this post-forward guidance world.
In the US this week, the focus will be on the PCE price index, Durable Goods and housing data.
There will be a moderate level of treasury issuance this week with the US Treasury settling approx. $223b in US Treasury securities and raising approx. $34b in new money.
The UK remains in focus this week with the heightened uncertainty surrounding Brexit. The BoE meets this week on interest rates and it will be important to see how the BoE responds to the latest developments/deadlock on Brexit. CPI data for the UK will be out before the BoE meeting. UK retail sales will provide some indication on changes in consumer sentiment.
The BoJ also meets this week. Japan National CPI will be released after the BoJ meeting.
The Eurozone and Japanese trade data will be in focus as we continue to track the impact of slower trade.
The Australian labour market survey will be out this week. This is an important indicator for the economy and how it might fare amid the house price correction. So far, employment growth has remained strong.
Further detail and a calendar of key releases is provided in the full briefing document – download it here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Dec 10, 2018
Macro review for w/c 3 December 2018 – There has been a large shift in the growth narrative over the last few weeks. Increased emphasis has been placed on the likelihood of slower growth in the near-term outlook due to yield curve inversion, fading stimulus and the broader context of slowing global momentum. More dovish Fed statements have started to re-shape the expectations for the path of rate hikes– this is what the Fed signalled it wanted to do in the minutes last week (i.e.no longer follow a ‘gradual path’ of rate hikes).
Several Fed Presidents have been advocating that the low inflation print over the last few months gives the Fed space to pause and reassess. Political pressure has also been mounting on the Fed to slow the rate of increases.
The outcome of the US-China G20 sideline meeting was used to project confidence for the path forward for trade negotiations. But uncertainty and headline risk around trade and tariffs remains. The USTR has confirmed a hard deadline of 1 Mar 2019 to conclude negotiations to avert an intensifying trade war.
US data this week shows that the economy continues to do well. The ISM’s indicate continued high rates of expansion across manufacturing and non-manufacturing sectors. Factory orders headline data were lower but highly influenced by volatile transports. Growth in core (ex-transports) new orders and shipments have been slowing (growing at a slower rate) throughout the year. Non-farm payroll growth was lower in the month, but the household survey shows that the higher level of employment growth continues to ‘absorb’ new/returning workers to the labour force and reduce unemployment. Avg wages continue to grow. On the more interest rate sensitive parts of the economy; consumer credit growth continued to accelerate while motor vehicle sales were down slightly.
Outside of the US, there is growing caution about growth.
The BoC minutes clearly stress the concern of the potential negative impact on the Canadian economy from the oil price ‘shock’ of the last few weeks as well as generally slower momentum going into Q4.
The Aus GDP Q3 print was much lower than expected. There is now a growing focus on slower growth amid a house price correction.
The ECB has previously stated that it will closely watch the data leading up the Dec meeting. Data this week suggests that the weakness is enduring. Eurozone PMI data indicated that expansion in both manufacturing and services activity continues to slow – led by core Eurozone countries. Production data in Germany was mixed – new orders remain lower than last year, but production growth had improved over the last two months. Eurozone GDP growth was confirmed at +0.2% and employment growth has similarly slowed to +0.2% in Q3.
Finally, Chinese trade data was well below expectations with exports and imports growing at a much slower pace. This lower level of activity is likely to continue to have far reaching effects throughout the global economy.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here (hit the back button on your browser to return to the site);
The outlook for the w/c 10 December 2018 – This week there will likely be a rare paydown by the US Treasury. The US Treasury will auction and settle $145b in ST bills this week, creating a net paydown of $20bn. The US Treasury will also auction $78b in 3/10/30yr securities, raising approx. $54b in new money – these will settle next week. There are no Fed holdings of securities that will mature this week.
UK Brexit will be a key focus this week with the UK Parliament expected to vote on 11 Dec.
Prelim PMI’s for
Dec are out this week for Japan, Eurozone and the US providing a first glimpse
at momentum going into the last month of Q4 and the last month of the year.
For the US this week, the focus will be on the PPI and CPI reports as well as retail sales and industrial production.
The ECB rates decision is this week. The ECB will provide a further assessment of current economic conditions in the Eurozone. It is still expected that Net Asset Purchases will reduce to zero at the end of the month.
A final read on Japanese Q3 GDP will be out this week. The important industrial production data will also be confirmed for Oct.
We’ll get further signs of the slowing housing market in Australia with the Q3 house price index and Oct housing lending data out this week.
The US trade deal negotiations process continues this week. The first public hearing will take place on Monday 10 Dec for the US-Japan trade negotiations. A public hearing for the US-Europe trade negotiations was scheduled for 14 Dec but has not yet been confirmed by the USTR.
Further detail and a calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Dec 3, 2018
The macro review for w/c 25 November 2018 – Despite a positive assessment of current conditions, a point in Chairman Powell’s speech during the week was interpreted as a change to the view of where we are in the hiking cycle – shifting from ‘a long way from neutral’ to ‘close to neutral’. That said, the FOMC minutes suggest that a further rate hike is likely in Dec. After that, policy will change if incoming data ‘prompts a meaningful reassessment of the outlook’ rather than follow the ‘gradual increases’ path. Expect to see this wording change in the FOMC statements.
Data this week indicated stronger growth in real personal consumption expenditure and real disposable personal income. The Oct core PCE price index growth was lower and is now outside of the lower end of the current FOMC projection range for inflation. This is not likely to represent a material change just yet, especially given the stronger consumption/income data. The regional surveys continue to record price and wage pressures.
On more interest-rate sensitive sectors; new home sales continued to fall. House prices slowed on an annual basis but were somewhat firmer in the month to month change.
ECB Draghi continued to err on the side that current European weakness is transitory. Net asset purchases are still likely to finish at the end of Dec. The prelim Euro area and German CPI growth slowed somewhat.
Japanese industrial production bounced back strongly in Oct. While the forecasts are for further increases in Nov and Dec, the Prelim PMI for Nov suggests that manufacturing growth continued to slow again, including weaker new orders.
Declines in private capex and construction for Australia are likely to detract from GDP growth in Q3.
The meeting between Presidents Trump and Xi has been broadly positive. The outcome was an agreement to move forward to address key issues on tariffs, IP protections and the trade imbalance. No further tariffs/escalations will be applied while negotiations take place. There is a 90-day window for discussions. The US will also be kicking off trade negotiations with Japan, Europe and the UK during that time.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here (hit the back button on your browser to return to the site);
Weekly Macro Review 25Nov2018
The outlook for w/c 3 December 2018 – It’s going to be a relatively lighter week for treasury issuance – the US Treasury will auction and settle approx. $171b in short-term bills, raising approx. $11b in new money. The 4wk and 8wk bill amounts are yet to be announced.
This week, Chairman Powell testifies on the US Economic Outlook to the Congress Joint Economic Committee. We’ll be looking for further signalling on the economic outlook and possibly any commentary on the weaker core PCE inflation growth from last week. There are several other FOMC member speeches this week. The key US data release this week will be non-farm payrolls. Also; the ISM reports, PMI’s and mortgage applications.
PMI’s will be released this week for the US, Europe, UK and Asian economies – helping to gain a handle on growth momentum in Q4.
There is a large amount of European data out this week and will be an important follow-up to answering whether current weakness is transitory in nature. This will feed into the ECB assessment at the Dec rate meeting.
Rates decisions for the RBA and BoC this week.
Australian Q3 GDP and retail sales data this week. We’ll be looking for further signs of impact from the slowing housing market.
Further detail and a calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 03Dec2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Nov 24, 2018
The macro review for w/c 19 November 2018 – Global growth remained in focus last week.
In the US, the question is whether the Fed will pause rate hikes. Prelim PMI’s for Nov indicated growth had slowed across manufacturing and services. The advance durable goods orders report for Oct had a large headline decline for new orders. This was partly because of large transport orders over the last few months, but there is some evidence that growth in ‘core’ orders have slowed somewhat.
Data on housing was a little mixed, but still shows that housing continues to slow. The housing market conditions index in fell relatively hard in Nov. But the Oct existing home sales recorded the first monthly increase in six months. New residential construction continues to slow.
The ECB minutes confirmed that current European data was weaker than had been expected. The Dec ECB meeting will be an important opportunity, with more data, to determine whether the current weakness is transitory or more persistent in nature.
Data out this week for Europe continues along the slowing theme. Prelim PMI’s highlight growth had slowed further in Nov – across both manufacturing and services in both core and periphery countries. Output growth in manufacturing is almost neutral and new orders declined. In Germany, both services and manufacturing growth continued to slow with manufacturing new orders and export orders declining.
The decline in German Q3 GDP was confirmed. The largest contributor was the decline in exports. But household consumption also contributed to the decline. The positive change in inventories offset the declines to a large degree.
The Japanese trade balance deteriorated in Oct. While exports grew at a faster rate (than in Sep), imports grew faster. CPI growth ex fresh food remained unchanged at 1%. Energy prices continue to impact CPI growth.
The Brexit agreement was approved at the EC meeting on 25 Nov. The UK Parliament is expected to vote on the deal on 12 Dec 2018.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here (hit the back button on your browser to return to the site);
Weekly Macro Review 19Nov2018
UPDATED – Outlook for w/c 25 November 2018 – A very full week of events, treasury issuance, Fed, ECB, BoE speeches and data releases.
The week kicks off early with the special EC summit on 25 Nov to finalise and formalise the Brexit agreement. The draft agreement then needs to be approved by both sides and there is still much uncertainty regarding the direction of the Brexit agreement through the UK Parliament.
It’s going to be an extremely heavy week for treasury issuance – the US Treasury will auction and settle approx. $285b in US Treasury securities, raising approx. $80.8b in new money. The 4wk and 8wk bill announcements are TBC. Its also month end and $24.9b in treasury securities will mature on the Fed balance sheet of which $12.3b will be reinvested.
The G20 Leaders’ Summit commences at the end of the week with a full week of meetings leading up that event. Presidents Trump & Xi are expected to meet on the sidelines regarding trade. Recent reports/statements/comments (posturing) are setting a more adversarial tone leading up to the meeting.
In the US this week, there will be a relatively full agenda of Fed speeches, included Chairman Powell at the Economic Club in NY. As we move into the realm of ‘no forward guidance’ we’ll be looking for signalling on the future path of rates. FOMC minutes will also be released this week. Data releases of note include the second estimate for GDP, house price data and PCE price index data.
Although there is no formal announcement, expect some US headlines regarding retail sales/traffic results regarding US Black Friday/Cyber Monday.
Prelim Japanese Industrial production this week will be an important follow-up on recent poor results. The expectation is for higher industrial production in Oct.
Eurozone and Germany CPI data.
ECB Draghi and BoE Carney speeches on Monday.
Further detail and a calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 25Nov2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Nov 19, 2018
The macro review for w/c 12 November 2018 – Slower global growth was a key focus this week across several fronts.
Speeches by regional Fed Presidents and Fed Chairman Powell all acknowledged slower growth globally, although growth remains strong in the US. “Broad consensus” to keep increasing US rates in the near term – but how far and how fast was the question. Mentioned by several Fed Presidents that modest inflation pressure is keeping expectations of rate increases in check.
ECB President Draghi also addressed concerns about slower European growth as GDP growth slowed to 0.2% in Q3, German GDP declined in Q3, Euro area employment growth slowed and CPI growth accelerated. Whilst Draghi claimed some of this weakness was due to ‘one-off’ impacts, some threats remain. Uncertainties around the medium term outlook have increased and will be better placed at the Dec ECB rate meeting to make a full assessment of the risks to growth.
Japanese Q3 GDP also declined – led lower by public and private demand and negative contribution from net exports. More recent data suggests that there might some improvement.
A deal was reached on Brexit, but headwinds/uncertainty remain on whether the UK parliament will approve the deal. Some mixed data – retail sales declined for the second month in a row and the labour survey shows most recent quarter that employment growth remains lower and unemployment increased. CPI growth remained steady.
The USTR has now made formal requests and set dates for public hearings into the negotiating objectives for its trade negotiations with Japan, the UK and Europe.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here (hit the back button on your browser to return to the site);
Weekly Macro Review 12Nov2018
The outlook for w/c 19 November 2018 – Despite more positive messages over the last few weeks, the tone of US-China discussions took a negative turn over the weekend at the APEC meeting. Whether this continues into the lead up to the G20 meeting, may pose some headline risk. Presidents Trump & Xi are expected to meet on the sidelines of the G20 meeting at the end of next week.
A lighter week for US treasury issuance with the US Treasury auctioning and settling approx. $148b in ST bills this week raising approx. $15b in new money. Next week will be month end and so far, its looking to be an extremely heavy week of issuance – with an estimated $295b in treasuries to be auctioned and settled, raising approx. $90.8b in new money.
It’s a short week in the US with the Thanksgiving Holiday on Thursday.
Given the focus on global growth, one of the more important releases later this week will be the prelim PMI’s for the US, Germany and the Eurozone for Nov.
For the US, housing data will be in focus along with Durable Goods data.
UK and Brexit – the special EC summit to finalise and formalise the Brexit agreement is scheduled for Sunday 25 Nov.
Further detail and a calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 19Nov2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
