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Investment-Expertise

The Chief Economist's weekly update

The Chief Economist's weekly update

To help you navigate through the economic news, here is a summary of last week’s main events and what to look out for next week.


Last weeks' key economic news (from 15 to 18 April):

  • In the US, retail sales have strongly rebounded, more than expected, and for a wide range of products. This bodes well for Q1 GDP probably closer to 2% q/q thanks to this rebound in March consumption. On the supply side, data were mixed; the first estimate for manufacturing PMI was stable, while the estimate for the service PMI has eased from past month; a mixed view also resulted from the easing of the Philly Fed index, while the New York Empire index has rebounded. The industrial production (March) was also lower than expected, with large swings at a sector level over the month, but production ex auto was slightly up by 0.2% m/m. In housing, the NAHB index has slightly increased, with improving prospects on future sales. Separately, the Fed’s Beige Book has pointed on a moderate growth, tight labor and limited rises in prices. Consumption is seen as being mixed, while demand for loans and housing were positive and manufacturing outlook was also positive but with uncertainties on trade. While the White House’s criticism of Federal Reserve policy continues, the Fed governors’ speeches have pointed to a stable environment for key rates this year and to a smooth interpretation of the 2% inflation target and accepting a temporary overshoot of it.
  • In the eurozone, the final inflation figure for March confirmed some moderation in inflation (headline at 1.4% y/y; core at 0.8% y/y) despite volatile monthly figures. This should continue and fuel the ECB’s dovishness. In Germany, ZEW expectations have rebounded from last month’s lows. The manufacturing PMI has slightly increased from past month but estimates remained lower than expected; the estimated rebound in Germany stayed moderate while sentiment has slightly eased in France; the services PMI has decreased contrary to expectations, but estimates for France and Germany have slightly regained from past month, pointing to a significant fall in sentiment in peripherals. In Italy, industrial orders have sharply decreased after a rebound in the prior month due to deteriorating foreign orders. Momentum in activity remains fragile, and only a progressive stabilization is expected on Q2.
  • In the UK, the labour market remained on a positive trend: unemployment stayed low (at 3.9%) and wage growth was still on a firm trend (3.5% y/y), fuelled by rises in service and construction sectors. Retail sales have positively surprised, up by 1.1% m/m, benefiting from the strength in labor and improving purchasing power despite uncertainties on the political situation. Inflation moderated as expected (0.2% m/m) and both headline and core inflation stabilised at just below 2%. PPIs have also stabilised (2.2% y/y for core output prices).
  • In Japan, final industrial production showed a slightly lower-than-expected rebound in activity (0.7% m/m vs. 1.4% m/m in early estimates) and it stayed on a negative yearly trend (-1.1 y/y). The tertiary index was also negative after rebounding last month. The first estimate for manufacturing PMI was slightly up, but still just below 50.
  • In China, all indicators were significantly better than expected, bringing fears that the PBoC will inject less liquidity in the future if the economy continues to improve. Industrial production was better than expected (8.5% y/y) and fixed-asset investment was in line with expectations (6.3% y/y). Retail sales were also on a higher trend (8.7% y/y), reflecting the positive impact of the various incentives launched in recent months. Q1 GDP growth was more resilient than expected (up by 6.4%), putting it on the same trend as in Q4 18.

 

Important for the scenario next week:

  • In the US, early Q1 GDP estimates are expected to come in at 1.8% (down from 2.2% q/q in Q4 18), marking another slowdown in activity from the Q2 18 peak. Monthly regional business surveys (Philly Fed non-manufacturing, Kansas, Richmond) should be mixed but in line with a progressive recovery in industry. Durable goods orders are expected to rebound after weak numbers during Q1. Several indicators will be released on housing (existing and new home sales, monthly prices) and they are expected to remain generally weak in comparison with the previous month.
  • In the eurozone, it will be a light week in terms of data. First estimates of eurozone consumer sentiment are expected to be slightly less negative than last month and to continue to rebuild progressively. The publication of French business and consumer sentiment should be along the same lines of a progressive recovery and less negative views. The German IFO is widely expected to continue to increase from still depressed levels, fuelling a more constructive growth outlook on German industry.
  • In Japan, the BoJ meeting should not reveal any changes to the current strategy. Labour data should see unemployment at its lowest level (2.3%). Industrial production and retail sales may stay on a constructive trend with positive figures expected, however, monthly data are highly volatile.
  • Central bank meetings: Turkey, Russia, Sweden, Indonesia and Colombia.
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