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
by Kim | Oct 8, 2018
Macro review for w/c 1 October 2018 – “Stalling export trade” was a key theme from the latest round of PMI’s for September. This was evident in the manufacturing PMI’s for the Eurozone, including Germany, Japan, China and Canada. There was ‘modest’ improvement in the US and UK export orders.
The manufacturing PMI for China is on the verge of contraction. The PBOC announced a reduction of 1% in the RRR for some banks. Chinese officials are also considering further fiscal stimulus measures.
The US ISM Manufacturing PMI and the Markit Manufacturing PMI, although not as strong as each other, were consistent with the final US Factory Orders data for Aug. Growth in factory orders for all manufacturing industries recorded the second strongest growth in new orders for the last year. Stronger factory orders data can be traced back to transport equipment manufacturing activity.
The divergence remains between the US ISM non-manufacturing PMI and the Markit Services PMI data. Activity in the ISM non-manufacturing reached all-time highs in Sep while growth in the US Markit Services PMI continued to slow in Sep.
US payrolls data was lower for Sep, but previous months were revised higher. From the household survey (16yrs+), annual employment growth continued to slow, and participation declined over the last year. Real earnings continued to grow at a constant rate.
US Consumer credit growth continued to accelerate in Aug, which is likely to support consumption/spending growth.
A busy week of US Federal Reserve speeches. A full range of views were expressed from hiking rates to a point that are somewhat restrictive, to taking a more cautious path and a slower rate of hikes. Chairman Powell’s interview garnered the most attention, but also noteworthy was Atlanta Fed President/CEO Bostic speech. He has previously been more cautious on hikes but admitted that the strength of the economy had surprised to the upside – with the potential for overheating, a higher path for rates would be required.
The RBA kept rates on hold and Australian retail sales rebounded in Aug after a weaker Jul.
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 01Oct2018
The outlook for w/c 8 October 2018 – Light supply of US Treasuries this week with the US Treasury auctioning and settling $156b in ST bills, raising approx. $1b in new money. Only $26m will roll off the Fed balance sheet this week on 11 Oct. The US Treasury will also auction approx. $74b in longer-term notes and bonds which will settle next Monday 15 Oct.
The key releases this week;
US PPI and CPI data for Sep
Eurozone and German Industrial production and German trade data – providing further insight on the slow-down in export/manufacturing demand
Aussie housing lending data for August – as we track the slowdown in the housing market
UK monthly GDP for Aug
Brexit is approaching critical timings – likely a heightened level of activity over the next week and a half. At the EC meeting next week on 17-18 Oct it will be decided whether there has been enough progress on the Brexit withdrawal agreement to call an additional EC summit on 17-18 Nov to agree and formalise the agreement.
Further detail and the 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 08Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 30, 2018
Macro review for w/c 24 September 2018 – As expected the US Federal Reserve increased the FFR by 25bps last week. A key change to the statement was the removal of “stance remains accommodative” but this did not signal a change in the path of policy. Projections for real GDP growth were upgraded in line with fiscal stimulus.
US data this week confirmed that real GDP growth in Q2 was 4.2% annualised and that inflation is not accelerating. In fact, core PCE price index growth slowed and came in at 0% in Aug. The annual headline rate also slowed slightly and remains around the Fed target.
Fixed mortgage rates continued to increase to new post GFC highs this week. Growth in house prices slowed. New home sales posted a slightly better month of growth after slowing for several months. From last week, existing home sales have declined over the last few months.
European inflation data continues to be led higher by accelerating energy prices. Prelim German and Euro-area CPI growth increased in Sept, coming in at +2.3% and +2.1% respectively. Euro-area CPI ex energy in the prelim estimate was +1.3% (annual).
Bank of Japan Governor Kuroda discouraged the idea that the BoJ might start to normalise rates. Governor Kuroda confirmed that extremely low rates will remain for an “extended period of time” meaning “a fairly long period of time”.
Brexit remains in a state of flux. Awaiting revised details of the trade component of Brexit, likely after the Conservative Party conference next week (from 30 Sep). UK GDP growth for Q2 was confirmed at +0.4% but Q1 growth was revised lower to +0.1%.
Expecting the US and Canada to announce details of an agreement on NAFTA early this week (Sunday). The US and Japan have agreed to commenced talks for a bilateral trade deal. The start of talks protects Japanese automakers from the threat of tariffs for now.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 24Sept2018
The outlook for w/c 1 October 2018 – Medium supply of treasuries this week with the US Treasury auctioning and settling $135b in ST bills and settling $106b in note auctions from last week (settlement 1 Oct). The US Treasury will raise approx. $22b in new money this week. The 4wk bill is yet to be announced.
It’s the start of a new quarter and the monthly cap for reinvestment of maturing securities on the Fed balance sheet increases to $30b for treasuries and $20b for MBS. These are now the maximum cap levels and are not scheduled to increase further.
A big data week;
PMI’s for Sept will be released for the US, Asian and European economies.
US jobs data.
A heavy schedule of US Fed speeches, including Chairman Powell.
Australia RBA rates decision and retail sales.
Expecting an announcement on a NAFTA agreement between the US and Canada early in the week.
Brexit – the new form of the trade component of the Brexit withdrawal agreement will likely be announced after the Conservative party conference this week. Less than 4 weeks remain to negotiate the Irish border backstop and the broader trade element of the withdrawal agreement.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 01Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
