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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 week’s key economic news (from 11 Nov. to 15 Nov.):

In the US, retail sales have rebounded (0.3% m/m) slightly more than expected after past month fall; sales by sector were mixed, with a fall in furniture and clothes but firmer autos sales: core sales were also up by 0.3% m/m, which is positive for consumption in Q4 GDP data. Headline inflation was slightly firmer (0.4% m/m) due to rises in energy and transport prices. Core inflation stayed moderate (0.2%m/m) and the yearly trend eased slightly (2.3% y/y from 2.4% y/y), whereas this trend regained for headline inflation (from 1.7% to 1.8% y/y). PPIs were firmer than expected (0.4% m/m) after a 0.3% m/m contraction last month; the rebound was driven by food, energy and trade services; once base effects are included, the yearly trend eased from 1.4% y/y to 1.1% y/y. Industrial production has contracted further, more than forecasted (-0.8% m/m after -0.3 %m/m), due to negative impact of the strike in the auto sector. The NFIB small firms index was up slightly (102.4 from 101.8) with improving views on the future economy and capex, while hiring plans were quite stable. The New York Empire manufacturing has eased from past month, contrary to expectations, but the 6-month view, opinions on new orders and employment have increased from past month. Jay Powell’s testimony to Congress remained in line with the last FOMC communication, confirming that no rate cuts were expected in the short run, but that the Fed’s monetary policy would remain accommodative as downside risks still exist.

In the eurozone, industrial production was modestly positive (0.1% m/m after -0.2% m/m) thanks to a rebound in capital and non-durable consumer goods. Final inflation (October) confirmed the estimated slowdown in headline (0.7% y/y) and the relative stability in core prices (1.1% y/y).  The second estimate for eurozone Q3 GDP remained unchanged (0.2% q/q) while German Q3 GDP surprised with a 0.1% q/q rise (from -0.2% q/q in Q2, revised from -0.1% q/q): consumption, residential construction and public spending more than compensated the negative results in firms’ investment and net exports. Moreover, the German ZEW index (expectations) rebounded strongly after several months of declines. In France, the unemployment rate increased slightly in Q3 (from 8.5% to 8.6%) for the first time in several months, but the trend remained positive for labour. The business survey (Bank of France index) made up ground on orders and production, having been flat for months. In Italy, industrial production was down by 0.4% m/m, as expected, after posting a 0.3% m/m rebound last month.

In Japan, Q3 GDP showed moderate growth (0.2% q/q), as expected. Despite the drag from net exports and some moderation in consumption, residential and corporate investment was firmer. Services’ tertiary index (September) rebounded, as expected, thanks to an upswing in trade ahead of the rise in VAT. Final industrial production was firmer than estimated (1.7%y/y), thanks to a rebound in machinery production.

In the UK, the Q3 GDP estimate was stronger than expected (0.3% q/q), showing a rebound from last quarter (-0.2% q/q); this was driven by services and construction, while consumption remained on a stable trend and net exports made a positive contribution to growth. Nevertheless, activity remains fragile, with the monthly proxy for GDP easing in September (-0.1% m/m). Industrial production (September) continued to fall (-0.3% m/m from -0.6% m/m the previous month) and manufacturing was also down sharply (-0.6% m/m). Retail sales declined slightly (-0.1% m/m) but this was broad-based across sectors. The labour market remained healthy as the unemployment rate eased marginally (from 3.9% to 3.8%). Nevertheless, the claimant count stayed on a rising trend; wage growth moderated (from 3.7% y/y to 3.6% y/y). Inflation declined by more than expected (-0.2% m/m; 1.5% y/y) on the effects of weakening food and household goods prices and the sharp rebound in the GBP over the period. PPIs (input prices) were sharply negative (-1.3% m/m) due to declining imported material and equipment goods prices over the month; the yearly trend declined further (-5.1% y/y from -3% y/y the previous month). The balance of opinion on housing remained negative despite the rebound in sales, but future demand still looks weak.

In China, economic indicators were all weaker than expected and on a slower pace than last month and are expected to stay mixed; both new yuan loans (CNY 661.3 billion) and total aggregate financing were lower than last month and were also well below expectations. On the activity front, retail sales eased (from 7.8% y/y to 7.2% y/y) contrary to expectations, with a broad-based decrease across sectors, including autos. Industrial production moderated by more than expected (4.7% y/y) due to weakening production in agriculture, metals and machinery sectors. Fixed-asset investment weakened further (5.2% y/y), particularly private investment (to below 5% y/y).

Central bank meetings: Mexico cut its key rates by 25 bp to 7.50%..


Over the week, activity indicators’ weakness in China contrasted with the relatively good surprises in the in the eurozone, in particular growth in Germany and the United Kingdom, which showed resilience following several quarters of decline in industry. This cyclical rebound, which is beginning to be priced in by the markets, remains uncertain and will depend on the US¬¬–China trade agreements that have been promised nearly every week and on the postponement of automotive tariffs.

Important for the scenario next week:

In the US, the first manufacturing and services PMI estimates should show a moderate increase from last month, confirming a progressive bottoming out in activity. Several regional business surveys will also be published (Philly Fed and Kansas). On the consumer side, final Michigan consumer confidence data should confirm the moderate rebound (95.7) seen in the first estimate. Housing starts and existing home sales are both expected to rebound strongly over the month, while building permits should remain stable over the same period, as should the NAHB sentiment index. Separately, the minutes of the Fed FOMC meeting will be published and several Fed governors will give speeches during the week.

In the eurozone, the first estimates for the manufacturing and services PMI should continue their progressive stabilisation or show a modest rebound. Preliminary eurozone consumer confidence data should also be slightly better oriented after volatile data in recent months. By country, business confidence is expected to increase slightly in France, and more details will be published on German Q3 GDP. Italian industrial sales and orders should remain volatile and show a modest rebound after the large fall last month.

In Japan, the first estimates of manufacturing and services PMI should show a modest rise to close to 50 after disappointing numbers last month. Inflation is expected to ease further (0.2% y/y) whereas core inflation should remain stable at 0.5% y/y.

Central bank meetings: Indonesia, Hungary and South Africa.

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Insight 06.11.2019

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