by Kim | Nov 12, 2018
The macro review for w/c 5 November 2018 – As expected, the FOMC kept rates on hold. There was little change to the accompanying statement. US data out this week confirmed the continued strength of economic activity. Growth in services activity remains close to near term highs and the services PMI grew at a faster pace. JOLTS data pulled back slightly, but job openings and hires remain close to all-time highs. Producer prices for final demand accelerated higher on the back of higher growth in energy, food and services prices.
US consumer credit growth was lower in the current month, but higher overall in the third quarter. Non-revolving credit drove overall consumer credit growth higher on the back of a pick up in both motor vehicle and student loan growth.
The EU rejected the UK compromise to resolve the Irish border backstop issue – both sides have not agreed on the implementation. There is still some possibility for negotiation, but its becoming unlikely that a deal will be ready in time to call a special EC meeting in Nov. Despite the uncertainty, UK data remains resilient. UK Q3 GDP grew at a faster pace driven by higher export growth and continued growth in household and government consumption. Some underlying signs of growth slowing throughout the quarter. This was also highlighted by the slower growth in the UK services PMI. New orders and some areas of consumer spending were weaker.
German industrial production was somewhat stronger than the manufacturing PMI had suggested – with production growing ahead of last year in the latest month. But slower growth/declines in new manufacturing orders, especially from overseas and the decline in manufacturing turnover were in line with the weaker momentum outlined in the Sep and Oct PMI’s.
Mixed data on Japan. Services PMI improved in Oct. The Japanese trade balance improved in the Sep month, but that was due to declining exports and mostly due to a larger slow down in imports. Slightly different on a quarterly basis as the trade surplus shifted to deficit in Q3 (Yen basis) – export growth slowed and imports grew at a faster rate. Machinery orders for Sep fell very hard – it’s also a volatile dataset. Will need to see how industrial output/activity responds in Oct and Nov, given the improvements in PMI’s.
The data on Aus housing continues to deteriorate. Overall lending for housing was down 14% from a year ago. The weekly auction clearance rates continue to fall. The RBA kept rates on hold as expected. Despite the likelihood of further falls in house prices, the RBA increased growth projections for 2018/19.
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 05Nov2018
The outlook for w/c 12 November 2018 – A heavy week of treasury issuance with the US Treasury settling $247b in bill, note and bond auctions this week and raising $59.6 in new money. Its also mid-month and approx. $17b in Fed holdings of securities will roll off the Fed balance sheet. The date to watch is 15 Nov.
Several US FOMC member speeches this week including Chairman Powell.
US data this week; CPI, retail sales, industrial production and regional surveys. Looking for activity to confirm the continued path of rate increases.
Important European data is out this week, especially given the recent weaker data; CPI, Q3 GDP and industrial production. ECB President Draghi is also scheduled to speak. At the end of Dec (next month) the ECB is scheduled to finish net asset purchases (currently running at €15b). German Q3 GDP and CPI will also be released this week – providing some insight as to the impact of slower industrial production on the broader German economy.
With Brexit uncertainty continuing to increase and the pockets of slightly weaker UK data last week – this week will provide an important read on the resilience of the UK consumer with retail sales, the labour market and CPI.
The Australian labour market report for Oct will be out this week also – something to keep on the radar given the slow-down in housing.
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 12Nov2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Nov 5, 2018
The macro review for w/c 29 October 2018 – Data this week confirmed continued strength in the US labour market. The highlight of the labour market report was the increase in participation. The gap between the current participation rate and that of the pre-GFC period for the 25-54yr age group is becoming smaller. Employment growth remains larger than the sum of what population and participation are adding to the labour force and the total number of unemployed persons still declined. Wages growth continues to increase.
Core PCE price growth remains at the Fed 2% target.
US regional activity indexes, manufacturing PMI and the ISM manufacturing PMI still show private sector manufacturing activity is expanding – albeit at a slower pace than recent highs. Some further acknowledgement of slower export orders. House price growth continues to slow – and this will be one to watch.
The probability of a Dec rate increase by the FOMC has edged back up to almost 80%.
Euro area growth is slowing, with GDP growth halving in the latest quarter. Last week, ECB President Draghi called it “weaker momentum, not a downturn”. The Oct manufacturing PMI’s are suggesting that activity may be rolling over in some of the larger economies. New orders, new export orders and output were weaker/contracting, especially in some of the larger manufacturing economies, including Germany. Elevated CPI growth is not helping – as higher energy costs are placing an added cost burden on households and firms. A reading on services PMI’s and industrial production (w/c 5 Nov) will help to balance out the view.
Japanese industrial production slowed further in the latest month. There was a sharper leg down in Sep versus a year ago growth – possibly due to the typhoon at the start of Sep. But trends across the board suggest that growth had peaked some time ago – tariffs and trade slow down are likely having an impact. Sep & Oct manufacturing PMI’s were slightly improved. We wont know until after November whether the weakness in Sep remains part of the bigger trend.
BoJ and BoE kept rates on hold. The BoJ revised down its inflation forecast for this year. The BoE revised its GDP growth forecast down slightly for 2019 (which is based on the smooth Brexit transition).
There is 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 29Oct2018
The outlook for w/c 5 November 2018 – The focus this week will be on the US mid-term elections on Tuesday.
The FOMC also meets this week and its likely rates will remain on hold at this meeting.
There will be medium level of treasury supply, with the US Treasury auctioning $263b in notes and bills. The bills will settle this week, raising approx. $27b in new money.
On Brexit, there may be a tentative solution/compromise for the Irish border backstop issue. A cabinet meeting is scheduled this week. UK Services PMI and Q3 GDP are also out this week.
German industrial production, factory orders and trade will be important this week, given the recent weakness in Europe/German manufacturing PMI’s. Services PMI’s will also help to balance out the view of private sector activity.
Similarly, Japanese trade balance and machinery orders will be important considering the weaker industrial production data last week.
The Sep housing credit data will be out for Australia this week. This will be the first read on mortgage credit growth since the Australian banks increased mortgage interest rates (out of cycle increases). Auction clearance rates continue to deteriorate suggesting further falls in prices.
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 5Nov2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Oct 29, 2018
The macro review for w/c 22 October 2018 – Fed speakers addressed whether it is time for a pause in interest rate increases given current market volatility, some weaker earnings outlook going into 2019 and weaker housing/auto sales. Fed outlook was always for more ‘moderate’ growth going into 2019, especially as fiscal stimulus waned. Unless employment and inflation indicators turn lower than forecasts, Fed unlikely to change course. Yet, the probabilities for another rate hike in Dec have fallen over the last week.
Most data this week pointed to continued strength in US economy, but some ongoing weakness in housing and weaker private investment figures in the GDP report. Chicago Fed National Activity Index has the economy still expanding above the historical average. Prelim PMI’s for Oct indicated improved momentum, especially in the domestic economy, but ‘export activity stagnating’. Durable goods remained strong on the back of defense and non-defense transport manufacturing – ex transport, new orders grew by a much small 0.1%. US Q3 GDP growth slowed somewhat – weakness in net export growth and private fixed investment was offset by growth in inventories and continued growth in personal consumption expenditure. Of note was the slowdown in the growth of the core PCE price index for Q3 – slowing from +2.2% in Q2 to +1.6% in Q3 (annualised rates of growth).
Weakness in some Eurozone data appears to be persisting, with the notable slow-down in Eurozone and German prelim PMI’s. Watching for confirmation in ‘hard data’. For example, Eurozone and German industrial production (reported two weeks ago for Aug) showed declines had stabilized.
The ECB kept rates on hold – no change to policy measures. Draghi see’s current European data reflecting ‘weaker momentum, not a downturn’ and weakness likely to be transitory.
Japan prelim manufacturing PMI showed a solid improvement, especially with new export orders growing for the first time since May.
The Bank of Canada increased its overnight rate to 1.75%.
More detail covered in the full review of last week – use the links on the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
Weekly Macro Review 22Oct2018
The outlook for w/c 29 October 2018 – The US Treasury will settle approx. $281b in ST bills and notes this week (notes were auctioned last week), raising approx. $37b in new money. Its also month end and $23.8b in securities on the Fed balance sheet will mature – there will be no re-investment of principal payments this month.
Several major economic releases this week and central bank decisions;
BoJ and BoE interest rate decisions
Key economic reports;
US – PCE price index, employment cost index, employment report, house price index, ISM manufacturing survey
Europe – Q3 GDP, prelim CPI (Oct), German retail sales
Australia – CPI Q3, retail sales and private sector credit
Manufacturing PMI’s – UK, US, Eurozone and Germany
Brexit remains an unknown – looking for stalled negotiations to recommence this week
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 29Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Oct 22, 2018
The macro review for w/c 15 October 2018 – There was no agreement on Brexit at the EC meeting and not enough progress had been made on the withdrawal agreement to schedule an additional EC meeting for November. This leaves timings and options very tight.
US data remained solid; retail sales were lower than expected because of a fall in one category – growth in most categories rebounded. Industrial production continued to grow at a constant pace. Growth in job openings continues to accelerate while growth in hires remains constant.
The key point from the FOMC minutes was the discussion around the expectation that interest rates may need to become ‘modestly’ restrictive for a period – to be decided though within the context of continued good US economic performance.
CPI’s in the Eurozone, UK and Japan continued to be influenced by higher energy prices. Annual Euro area CPI grew at 2.1% in Sep but ex energy was 1.3%. In the UK, CPI-H annual growth slowed to 2.2% – but ex energy/food/alcohol/tobacco CPI growth was lower at +1.8%. In Japan, CPI ex fresh food grew at +1% (annual), but ex fresh food and energy grew at a lower annual rate of +0.4%.
UK data was mixed; retail sales missed in Sep. The UK labour market remains resilient, but latest quarter data points to some weakness with employment declining in the quarter.
Chinese GDP growth slowed in Q3 to +1.6% versus +1.8% in Q2. The annual rate slowed to +6.5%.
There is more detail covered in the full review for last week – use the links in the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
Weekly Macro Review 15Oct2018
The outlook for w/c 22 October 2018 – The US Treasury will auction approx. $276b in ST bills and notes this week. The bills will settle this week and the US Treasury will raise approx. $16b in new money (a moderate week).
Brexit negotiations will continue this week. There are several (contentious and likely unacceptable) options under consideration to break the current deadlock on the Irish border issue.
The key data releases this week;
US Q3 GDP and Durable Goods
Preliminary PMI’s for October
ECB and BoC interest rate decisions this week
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 22Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Oct 15, 2018
The macro review for w/c 8 October 2018 – Inflation reports in the US were somewhat mixed. Growth in producer prices in Aug was higher, due to transport and warehouse prices. The annual core PPI growth remains at its highest level of the last 12months at +2.9%. In September, consumer price growth was slower – with a lower impact from energy prices, but continued pressure from shelter. Annual growth in core CPI remained at 2.2%, while the headline CPI slowed to +2.3%.
An important speech by the NY Fed President/CEO and Vice Chairman of the FOMC – John Williams. The Fed will review its current framework for managing interest rates over the coming months. Will either continue using the current system or go back to the pre-crisis system – possible implications for the value of excess bank reserves held at the Fed. Also, re-iterated that the Fed is nearing the end of the normalization process – less role for forward guidance and a shift away from using the ‘neutral’ rate benchmark.
European industrial production rebounded in August. But within that, German industrial production continued to decline, albeit to a lesser degree than the prior month.
German CPI reached its highest level in seven years at +2.3% on the back of higher energy prices – core CPI growth remains lower at +1.5%.
Australian housing – new lending for housing continued to fall in Aug. This time, the decline included owner occupier housing credit, notably in the two key states of NSW and to a lesser degree Vic. This data is prior to the out-of-cycle mortgage rate hikes taken by several of the major banks back at the start of September. Auction clearance rates remain at their lows (NSW & Vic). The data suggests further falls in house/apartment prices.
Brexit – at this stage, no further progress has been made on resolving the key issues of the Brexit withdrawal agreement. Unless progress is made over the next few days, its not likely that an additional EC summit will be announced for November.
It now looks likely that US President Trump and Chinese President Xi will meet on the sidelines of the G20 in late November.
There is more detail covered in the full review for last week – use the links in the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
Weekly Macro Review 08Oct2018
The outlook for w/c 15 October 2018 – The new 8 week bill will go to auction for the first time this week, slightly ahead of schedule. It will be a heavy week of treasury settlements. This week with the US Treasury will auction and settle approx. $154b in ST bills (the 4wk and 8wk are yet to be announced), raising approx. $21b in new money. The longer-term notes and bonds auctioned last week will settle on Monday 15 Oct – raising approx. $50b in new money. In all, $228b in auctions will settle this week, raising approx. $71b in new money (net new issuance).
The key releases this week;
US Retail Sales and FOMC minutes
Chinese data will be in focus – especially Q3 GDP growth and New Loans
The UK will be in the thick of it this week – the EC summit, CPI, PPI, Retail Sales and the Labour Market Survey. The EC summit is on 17-18 Oct and it will likely be announced on the 18 Oct whether enough progress has been made on the agreement to call an emergency EU meeting in November to finalize the Brexit deal. The next EC meeting will be December and it should be clear whether negotiations will/can get pushed out in time for an agreement to be finalized at the December meeting.
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 15Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
