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Daily Macroeconomic Digest

mercoledì 20 giugno
Late cycle signals in US housing

US: Existing home sales (May): 5.43M vs 5.42M expected (prior: 5.45M revised from 5.46M)

  • Sales of single family houses have moderated over the past two months and inventories have increased; prices remain on a high pace (5.2% y/y median prices).
  • The various recently published indicators on housing were all mixed and, besides some volatility on a monthly basis, they point towards a late cycle in housing.


Sweden: Consumer confidence (June): 96.8 vs 100 expected (prior: 97.9 revised from 98.5)

  • A weakening sentiment on present and future economic situation mainly explains the lower trend seen on confidence over the past two months.


Sweden: Manufacturing confidence (June): 116.1 vs 116 expected (prior: 118.5 revised from 118.6)

  • After a rebound in April, sentiment is weakening again.


Germany: PPI (May): 0.5% m/m vs 0.4% expected (prior: 0.5%)

  • Energy and core prices have rebounded over the month.
  • Yearly trend was up from 1.9% y/y to 2.8% y/y (prices less energy up from 1.5% y/y to 1.8% y/y).


Russia: Retail sales (May): 2.4% y/y vs 2.3% expected (prior: 2.7% revised from 2.4%)

  • A rebound in sales in May; a stable trend in yearly figures.


Russia: Real wages (May): 7.3% y/y vs 7.5% expected (prior: 7.6% revised from 7.8%)

  • Real disposable income was weak, up only by 0.3% y/y.


Russia: Unemployment rate (May): 4.7% vs 4.9% expected (prior: 4.9%)

  • A declining trend from the 5.2% level in January.
martedì 19 giugno
US housing starts have reached a new high

US: Housing starts (May): 1350k vs 1311k expected (prior: 1286k revised from 1287k)

  • Building permits: 1301 k vs 1350 k expected (1364 k prior month).
  • A strong rebound in housing starts (concentrated in one region), but weak permits point towards some moderation in housing starts in the coming months.
  • Demand in housing remains strong but it could be limited by rising construction costs, higher mortgage rates and rising house prices.


Sweden: Unemployment rate (May): 6.1% vs 6.3% expected (prior: 6.3%)

  • Unemployed has decreased and rate is coming back to low levels.


Poland: Industrial production (May): 1.6% m/m vs 0% expected (prior: -6.8%)

  • All major sectors have rebounded except electricity and gas; manufacturing sector was up by 2.4% m/m.
  • The yearly trend has moderated from 9.3% y/y the prior month to 5.4% y/y.


Poland: PPI (May): 1.1%m/m vs 1% expected (prior: 0.3%)

  • Prices of mining were up by 2.1% m/m, up by 6.1% y/y.
  • Trend in prices has accelerated from 1% y/y to 2.8% y/y, mainly due to higher energy prices.


Russia: PPI (May): 3.9% m/m vs 1.3% expected (prior: 1.2%)

  • Rises in energy prices and changes in currency have fueled the rebound in PPIs.
  • Yearly trend was up by 12.5% y/y after 7.5% y/y prior month.
lunedì 18 giugno
US: eroding sentiment in housing

US: NAHB housing market index (June): 68 vs 70 expected (prior: 70)

  • Sentiment on housing has eroded, due to lower current and future sales.
  • Higher construction costs (rising imported prices of lumber) and higher mortgage rates may weigh down further on the sector.


Turkey: Unemployment rate (March): 10.1% (prior: 10.6%)

  • Unemployment rate has eased after a rise in Jan.-Feb. period; in seasonally adjusted data, the unemployment has evolved around 9.9% over the past three months.
venerdì 15 giugno
US: weakening consumer expectations and disappointing industrial production

US: Empire manufacturing (Jun): 25 vs 18.8 expected (prior: 20.1)

  • In the underlying details, both new orders (21.3; prior: 16), and shipments (23.5; prior: 19.1) improved further in June. The ongoing strength in these components suggests the headline should continue along at a solid level into the third quarter.

US: Industrial production (May): -0.1% m/m vs 0.2% expected (prior: 0.9% revised from 0.7%)

  • Capacity utilization: 77.9% vs 78.1% expected (prior: 78.1% revised from 78%)
  • The weakness was concentrated in auto production, which collapsed 6.5% m/m. Adjusting for this, the report was not as bad as manufacturing excluding autos only fell 0.2% m/m, while utilities surged 1.1% m/m and mining ramped up 1.8% m/m.

US: Consumer confidence (Michigan) (Jun P): 99.3 vs 98.5 expected (prior: 98)

  • Current conditions: 117.9 (prior: 111.8)
  • Expectations: 87.4 (prior: 89.1)
  • Inflation expectations have marginally increased from past month (2.9% at 1-year; +0.1pp; 2.6% y/y on 5-10y horizon).

Eurozone: CPI (May F): 0.5% m/m as expected (prior: 0.5%)

  • On a y/y basis: 1.9% as expected (prior: 1.3%)
  • CPI core y/y: 1.1% as expected (prior: 0.8%)
  • The breakdown of the report was largely unchanged; at the headline level, energy inflation stood at 6.1% from 2.6%, while unprocessed food inflation increased to 2.4% from 1.5%.
giovedì 14 giugno
Solid retail sales in the US, ECB: Draghi still on the dovish side

US: Retail sales (May): 0.8% m/m vs 0.4% expected (prior: 0.4% revised from 0.3%)

  • Strength in retail sales was broad-based, with the notable exception of furniture (-2.4% in May vs. +2.7% in April) and sporting goods (-1.1% vs -0.2%). The value of motor vehicle sales rose by 0.05% m/m and higher gasoline prices translated into a 2% m/m increase in the value of gasoline station sales. Building materials sales rebounded by a strong 2.4% m/m and restaurant sales increased by 1.3% m/m, which reflects the slightly later start to spring in the northeast this year.


US: Import price index (May): 0.6% m/m vs 0.5% expected (prior: 0.6% revised from 0.3%)

  • On a y/y basis: 4.3% vs 3.9% expected (prior: 3.6% revised from 3.3%)
  • Petroleum prices rose by 5.9% m/m, while capital goods declined by 0.1% m/m.


US: Initial jobless claims (Jun 9): 218k vs 223k expected (prior: 222k)

  • Continuing claims: 1697k vs 1732k expected (prior: 1746k revised from 1741k)
  • By state, jobless claims fell by 4k in California and 2k in Florida while filings rose by 2k in Pennsylvania.
  • Overall, today’s report suggests that the pace of layoffs remains low.


ECB Meeting: key points

  • The ECB made two important announcements today.
    • First, the ECB will continue to make net purchases at the current monthly pace of EUR 30 billion until the end of September 2018. Then, the Governing Council that, after September 2018 and subject to incoming data confirming the its medium-term inflation outlook, it will reduce the monthly pace of the net asset purchases to EUR 15 billion until the end of December 2018, which will mark the end net purchases. Moreover, they reiterated that their intention to maintain reinvestments of the principal payments from maturing securities for an extended period of time after the end of net asset purchases.
    • Perhaps more importantly, on forward guidance about interest rates, the ECB expects them to remain at their present levels "at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path".
  • About Italy, Draghi mentioned that redenomination risk has not re-emerged and contagion from Italy to other member states has been limited. In our view, as long as the problem remains largely contained to Italy, the ECB will probably stay on the sidelines.
  • The Government Council finally took the decision to give the details about the end of the net purchase today, rather than in July as was expected by most observers until last week. This does not make much difference and the path is in line with expectations. The surprise came from the pledge on rates – no rate hike at least until summer 2019 -, which highlights the huge dichotomy between the ECB and the Fed and explains the sharp fall in the EUR.


Germany: CPI (May F): 0.6% m/m as expected (prior: -0.1%)

  • On a y/y basis: 2.2% as expected (prior: 1.4%)
  • Food prices rose by 0.2% m/m, while transport prices increased by 1.2% m/m.


France: CPI (May F): 0.5% m/m vs 0.4% expected (prior: 0.4%)

  • On a y/y basis: 2.3% as expected (prior: 1.8%)
  • Food prices rose by 0.9% m/m, while energy prices increased by 2% m/m.


UK: Retail sales (May): 1.3% m/m vs 0.3% expected (prior: 1.4% revised from 1.3%)

  • Retail sales rebounded strongly in May with the ONS pointing to warm weather and the royal wedding celebrations as the main drivers.
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Analisi 20.06.2018

Managing political risk in EM

There are around 80 countries in which we can invest, so we may have to contend with up to 20 elections a year. This does not call for being either cautious or bullish, but for being politically aware and having a process for assessing political risk. In our case this means understanding the economic impact of different outcomes, working out which ones have been priced in, and monitoring opinion polls.