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Daily Macroeconomic Digest

Friday 14 December
Weakening business sentiment in the US and the Eurozone; sustained US retail sales

US: Retail sales (Nov.): 0.2% m/m vs 0.1% expected (prior: 1.1% revised from 0.8%)

  • Past month data were revised up and core sales were particularly strong, up by 0.9% m/m (vs 0.4% m/m expected) after 0.7% m/m the prior month.
  • Despite a fall in gasoline stations due to lower oil prices, spending on furniture, electronics, and health and via internet was particularly strong.
  • Consumption should still support GDO growth on Q4-18.

US: Industrial production (Nov.): 0.6% m/m vs 0.3% expected (prior: -0.2% revised from 0.1%)

  • Production has been boosted by energy and utility, while manufacturing production was flat over the month, due to small rise in auto production and some contraction in business equipment.
  • These sectors could suffer from firm USD and from some slowdown in the demand outside the US.

US: Markit Manufacturing PMI (Dec.): 53.9 vs 55 expected (prior: 55.3)

  • First estimate has pointed towards lower sentiment, due to lower employment and lower new orders.
  • This slowdown in sentiment could lead to moderate activity in industry at year-end, while the consumer sector remains on a better shape than the manufacturing sector.

US: Markit Services PMI (Dec.): 53.4 vs 54.6 expected (prior: 54.7)

  • Sentiment has weakened, on lower opinions on future activity, but employment remained on the rise.

Eurozone: PMI Manufacturing (Dec.): 51.4 vs 51.8 expected (prior: 51.8)

  • Flash PMI has eased further on rising uncertainties on domestic and export situation. Flash PMI by country has revealed downside risks on France with PMI now below 50, while in Germany sentiment in manufacturing has just eroded from past month.

Eurozone: PMI Services (Dec.): 51.4 vs 53.4 expected (prior: 53.4)

  • Flash index on services has fallen significantly; the index was resilient on Q2, but it has fallen in Q3 and continued to fall over Q4. This points towards downside risks on the European growth.

Germany: Wholesale price (Nov.): 0.2% m/m (prior: 0.3%)

  • Inflation has moderated from 4% y/y to 3.5% y/y.

Italy: Industrial orders (Oct.): -0.3% m/m (prior: -3.1% revised from -2.9%)

  • Sales were down by 0.5% m/m after flat number in Sept.; domestic and foreign orders and sales have decreased over the month.
  • Yearly trend in orders have rebounded (2% y/y) after weak numbers in the past two months.

Russia: Central bank has increased key rates from 7.50% to 7.75%.

  • This decision was not expected by consensus, and the bank said it could hike further with upside risks on inflation remaining in place.
Thursday 13 December
ECB will end its QE in December as expected, but looks more cautious

US: Initial jobless claims (Dec.8): 206k vs 226k expected (prior: 233k revised from 231k)

  • Continuing claims: 1661 k after 1636 k past week.


US: Import price index (Nov.): -1.6% m/m vs -1% expected (prior: 0.5%)

  • Export prices were also down by 0.9% m/m after +0.5% m/m the prior month.
  • Strength of the dollar and lower oil prices have moderated import prices.


Eurozone: ECB will end its QE in December as expected.

  • The ECB has revised down its growth projections for next year from 1.8% to 1.7%, and has a moderate growth scenario for the coming years (1.7% in 2020 and 1.5% in 2021). Inflation forecasts were quite unchanged but they remain below 2%, and point to lower pace next year, at 1.6% y/y.
  • Interestingly, the ECB also pointed on tight labor markets, rising wages and towards a progressive rise in the core inflation.
  • The ECB will maintain stable its balance sheet and continue to reinvest on bonds with the capital rule for government bonds.
  • This reinvestment process is supposed to provide enough liquidity to the system. Other liquidity measures could be provided, and these measures have been mentioned by some governors.
  • On risks, the balance could be negative in the future if headwinds continue. Risks (foreign and domestic) are seen as temporary and the ECB remains moderately confident on growth.
  • It seems clear the ECB is preparing to enter in a risk management period, rather than a simple normalization process of its still accommodative policy.


UK: RICS house price balance (Nov.): -11% vs -10% expected (prior: -10%)

  • Expectations on prices, sales and buyers have sharply fallen, close now to the same level seen in June 2016.


Switzerland: PPI-import prices (Nov.): -0.3% m/m vs 0.1% expected (prior: 0.2%)

  • Prices have moderated from 4.2% y/y to 2.9% y/y.


Switzerland: Central bank has left unchanged its strategy

  • The SNB continues to see the Swiss Franc as highly valued and fragile to external developments.
  • The SNB will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration.
  • The forward inflation path was revised lower throughout the SNB’s forecasting horizon. The forecast for 2019 has been revised down from 0.8% to 0.5% and from 1.2% to 1% in 2020, due to moderate growth prospects.


Sweden: Unemployment rate (Nov.): 6.1% vs 6.2% expected (prior: 6%)

  • Employment has slightly increased but the improvement on the ratio of unemployment has stopped.


France: CPI (Nov.): -0.2% m/m as expected (prior: 0.1%)

  • Inflation has been confirmed in moderation over past month, due to lower energy, food and communication prices. Trend was stable at 2.2% y/y.


Germany: CPI (Nov.): 0.1% m/m as expected (prior: 0.2%)

  • Except energy, all other prices have moderated over the month; yearly trend has moderated from 2.5% y/y to 2.3% y/y.


Brazil: Retail sales (Oct.): -0.4% m/m vs 0% expected (prior: -1.3%)

  • Sales stayed negative and the contraction was broad based across sectors.


Wednesday 12 December
US: moderate headline inflation, but progressive rise in core inflation

US: CPI (Nov.): 0% m/m as expected (prior: 0.3%)

  • Headline inflation was flat as expected, but prices have diverged across sectors.
  • Energy prices, transport, apparels, education and leisure have fallen during the month; on the opposite, services remained steady (up by 0.2% m/m) and rents were up by a regular 0.3% m/m.
  • Energy prices have driven trend in headline prices lower, from 2.5% to 2.2% y/y, while core prices remained on a firm trend, up by 2.2% y/y after 2.1% y/y the prior month. In this environment, the Fed is justified to continue to normalize.


Sweden: CPI (Nov.): -0.1% m/m vs 0% expected (prior: -0.1%)

  • Core prices have also decreased (-0.1% m/m); inflation has declined from 2.3% y/y to 2% y/y and core inflation from 1.5% y/y to 1.4% y/y. Prices of housing and in some services (hotels; restaurants) remained on a sustained trend.
  • This could ease a bit the pressure on the central bank to raise rates.


Italy: Unemployment rate (Q3-18): 10.2% vs 10.3% expected (prior: 10.7%)

  • The decline in unemployment has accelerated over the past quarter; nevertheless, trend in employment looks volatile and fragile in this current environment.


Eurozone: Industrial production (Oct.): 0.2% m/m vs 0.1% expected (prior: -0.6% revised from -0.3%)

  • Production has rebounded slightly more than expected, due to the auto and capital good sectors, while energy production has contracted for a second month. Further technical rebound in auto is expected by the consensus in Nov.
  • Trend in industrial activity has slightly recovered (from 0.8% y/y to 1.2%y/y), but its pace remains very modest and fragile.


Russia: GDP (Q3-18): 1.5% y/y vs 1.3% expected (prior: 1.9%)

  • Q3 GDP growth has been revised up, but the slowdown from Q2 remained in place.
  • The slowdown was centered in a few sectors, such as manufacturing and tourism. The growth outlook remains moderate and is expected to stay in a 1.5% -2% range.
Tuesday 11 December
US: moderate rise in producer prices; falling sentiment among small and medium firms

US: NFIB Small Business optimism (Nov.): 104.8 vs 107 expected (prior: 107.4)

  • The fall in sentiment came mainly from lower sentiment on further improvement on the economy and sales. Views on employment and capex remained positive and still strong.
  • The index has gone back to the level seen at 2016 year-end, pointing towards some moderation in current activity.


US: PPI (Nov.): 0.1% m/m vs 0% expected (prior: 0.6%)

  • Energy prices were up by 1.3% m/m while energy prices were down by 5% m/m. Services prices were up by 0.3% m/m.
  • Core PPIs were up by 0.3% m/m vs 0.2% m/m expected.
  • Trend in headline PPI has moderated from 2.9% y/y to 2.5% y/y, while core PPI remained stable at 2.8% y/y.


UK: Unemployment rate (ILO) (Oct.): 4.1% as expected (prior: 4.1%)

  • Claimant count (Nov.): 2.8% after 2.7%; jobless claims: 21.9 k after 23.2 k past month.
  • While unemployment ratio remained low, trend in job creations has deteriorated since July 2018.


UK: Average earnings incl. Bonus (Oct.): 3.3% y/y vs 3% expected (prior: 3.1% revised from 3%)

  • Wage growth remained on a rising trend; rises in construction and services were up by 3.5% y/y, more than the global average rise.
  • This should maintain pressure on BoE, while trend in economy continues to slow down regularly.


Germany: Zew (Dec.): -17.5 vs -25 expected (prior: -24.1)

  • Expectations were less negative and have slightly regained, but views on current situation have continued to decrease.


Turkey: Current account (Oct.): 2.77bn USD vs 2.5bn expected (prior: 1.81bn revised from 1.83bn)

  • Current account has shown a surplus over the past three months. Trade balance has also improved, showing a surplus in Oct.


Friday 07 December
US labor: positive underlying trend despite slower than expected monthly job creations

US: Non-farm payrolls (Nov.): 155k vs 198k expected (prior: 237k revised from 250k)

  • Data were below expectations and past month data have been revised slightly lower; the 3-month average is now at 170 k, still in line with a 2.5%-3% growth trend.
  • By sector, job creations offered a mixed picture across sectors: the good news were a stable trend in manufacturing, sustained numbers in retail (internet sales and delivery) and in education-health; the negative surprises came from creations below trend in temporary business, finance, information and in public sectors. The volatility in sectors could also be related with extraordinary events (weather, fires..) and it is too early to interpret it as a reversal in trend.
  • The unemployment rate was stable at 3.7%; alternative measure to unemployment has slightly increased in relation with lower creation in the temporary sector.
  • Wages growth has been slightly revised lower on a monthly basis (0.2% m/m in Nov. and 0.15% m/m in Oct.), but the yearly trend remains unchanged around 3% y/y.
  • Despite monthly volatility, trend remains positive in labor; the activity and job creations have probably passed a peak and growth in Q4 is expected at a slower pace than in Q3; these monthly numbers are far from being early signal of any recession and the Fed should normally hike its rates in next Dec.


US: Consumer confidence (Michigan) (Dec.): 97.5 vs 97 expected (prior: 97.5)

  • Views on current situation have rebounded, while expectations have slightly moderated with lower prospects of future employment. Willingness to consumer remained at a high level for large items.
  • Inflation expectations have eased a bit (2.7% y/y from 2.8% y/y at one year; 2.4% y/y from 2.6% y/y at 5 year).
  • Consumption is expected to remain on firm trend.


US: Wholesale inventories (Oct.): 0.8% m/m vs 0.7% expected (prior: 0.7%)

  • Inventories have increased significantly for autos, computers and machines; total sales have moderated, being down by 0.2% m/m. Sales-to-inventory ratio is now on an increasing trend.


Norway: Industrial production (Oct.): 2.3% m/m (prior: -2% revised from -1.5%)

  • Manufacturing production has rebounded from -0.3% m/m past month to 1.5% m/m. The rebound in production was driven by energy, food and basic materials.
  • Contrary to some other countries, trend in production is rising.


France: Industrial production (Oct.): 1.2% m/m vs 0.7% expected (prior: -1.6% revised from -1.8%)

  • The production in the auto sector has rebounded and activity has also regained in other sectors.
  • Nevertheless, yearly trend remained negative: -0.7% y/y for total production; -1.3% y/y for manufacturing sector.


Germany: Industrial production (Oct.): -0.5% m/m vs 0.3% expected (prior: 0.1% revised from 0.2%)

  • While production in capital goods was up by only 0.3% m/m, the activity in the other sectors was negative, particularly in consumer goods and energy (-3.% m/m in both sectors).
  • Yearly trend has turned more volatile in past months but it has rebounded from 0.1% y/y prior month o 1.6% y/y.


Brazil: CPI (Nov.): -0.21% m/m vs -0.09% expected (prior: 0.45%)

  • Prices of housing, clothes, transport and health have declined over the month. Yearly trend has moderated from 4.56% y/y to 4.05% y/y, being closer to central bank target.
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