Previewing the rest of this week’s events, we have a bumper week of US data over the next five days, in part making up for two days of blackout last week for Thanksgiving. Aside from Friday’s nonfarm payroll report, the key releases to look for are manufacturing ISM and construction spending (today), unit motor vehicle sales (tomorrow), non-manufacturing ISM (Wednesday), preliminary Q3 real GDP and initial jobless claims (Thursday), as well as personal income/consumption and consumer sentiment (Friday). Wednesday’s ADP employment report will, as usual, provide a preamble for Friday’s payrolls.
In the coming week we will receive the usual batch of key data typical for the very beginning of the month. (Read more…) There are also 7 MPC meetings: Euro Area, UK, Canada, Australia, Norway, Mexico, Poland. In each case consensus expects no major announcements and the central banks to stick to the current monetary policy stance.
The key data releases are US NFP and unemployment rate, preceded by manufacturing and non-manufacturing ISM surveys. ADP employment will be scrutinized, together with the latest claims data for hints for the labor market data on Friday. This week also brings business surveys from China, UK, Euro Area (final) as well as other regions. In addition, we have revised Q3 GDP data from the Euro Area and the US.
Monday, Dec 2
- US Manufacturing ISM Survey (Nov): Consensus 55.0, previous 56.4
- US Construction Spending (Oct): Consensus +0.4%
- Euro Area Manufacturing PMIs (Nov, final): Consensus 51.5, previous 51.5 (flash)
- China HSBC Manufacturing PMI (Nov): consensus 50.5, previous 50.9
- UK Manufacturing PMI (Nov): consensus 56.1, previous 56.0
- Sweden Manufacturing PMI (Nov): consensus 53.6, previous 52.0
- Switzerland Manufacturing PMI (Nov): consensus 54.4, previous 54.2
- Brazil Trade Balance (Nov): Consensus USD+0.27bn, previous USD-0.22bn
- Indonesia Trade Balance (Oct): previous USD-700mn
Tuesday, Dec 3
- Australia MPC: Consensus has cash rate target unchanged at 2.50%. However, if the non-mining recovery disappoints over the coming months, a rate reduction in March is likely.
- US Fed Potter (FOMC non-voter) speaks
- Euro Area ECB Nowotny speaks
- UK Construction PMI (Nov): consensus 59.0, previous 59.4
- Japan Wage Statistics (Oct)
- Turkey CPI (Nov): consensus +7.80%yoy, previous +7.71%yoy
- Brazil Real GDP (Q3): consensus +2.4%yoy, previous +3.3%yoy
- Hungary Trade Balance (Sep, final): previous EUR+847.3mn
- Also interesting: US Motor Vehicles Sales (Nov), South Africa CA Balance (Q3), Venezuela INPC Inflation (Nov)
Wednesday, Dec 4
- Canada MPC: Consensus has overnight lending rate unchanged at 1.00%. The Bank of Canada is expected to acknowledge stronger growth, but we see no policy implications from this given the BoC’s shift in focus to low inflation and the lagging recovery in manufacturing.
- Poland MPC: Consensus have policy rate unchanged at 2.50%
- Hungary MPC minutes (Oct)
- Chile MPC minutes (Nov)
- US Non-Manufacturing ISM Survey (Nov): Consensus 55.1, previous 55.4
- US ADP Employment Change (Nov): consensus 173K, previous 130K
- US Trade Balance (Oct): Consensus USD-40.2bn, previous USD-41.8bn
- US New Home Sales (Sep): Consensus +1.0%, previous +7.9%
- US Fed Beige Book
- Euro Area Services PMIs (Nov, final): Consensus 50.9, previous 50.9 (flash)
- Euro Area Composite PMI (Nov, final): Consensus 51.5, consensus 51.5, previous 51.5 (flash)
- Euro Area GDP (Q3, rev.): consensus -0.4%yoy, previous -0.4%yoy (Q3)
- Euro Area Retail Sales (Oct): consensus +1.0%yoy, previous +0.3%yoy
- UK Services PMI (Nov): consensus 62.0, previous 62.5
- Canada Merchandise Trade Balance (Oct): consensus CAD-0.77bn, previous CAD-0.44bn
- Also interesting: Australia GDP (Q3), Romania GDP (Q3, prelim.)
Thursday, Dec 5
- Euro Area MPC: Consensus has main policy tools – MRO and deposit rates – unchanged at 0.25% and 0.00% respectively
- UK MPC: Consensus has main policy tools – policy rate and asset purchases target – unchanged at 0.50% and GBP375bn respectively
- Norway MPC: Consensus has deposit rate unchanged at 1.50%
- US Fed speakers: Lockhart (FOMC non-voter), Fisher (FOMC non-voter)
- US GDP (Q3, 2nd est.): Consensus +3.1%, previous +2.8%
- US Initial Jobless Claims: previous 316K
- UK Budget Announcement
- Canada PMI (Nov): consensus 60.0, previous 62.8
- Chile GDP (Oct): Consensus +4.0%yoy, previous +4.3%yoy
- Spain IP (Oct): consensus -0.1%yoy, previous +1.4%yoy
- Also interesting: Russia CPI (Nov)
Friday, Dec 6
- US Non-Farm Payrolls (Nov): Consensus 180K, previous 204K
- US Unemployment Rate (Nov): Consensus 7.2%, previous 7.3%
- US Fed speakers: Evans (FOMC voter), Plosser (FOMC non-voter)
- US U. of Michigan Consumer Sentiment (Dec, prov.): Consensus 73.9, previous 73.2
- US CPI (Oct): Consensus Flat mom, previous +0.1%mom
- US Personal Consumption (Oct): Consensus +0.2%, previous +0.2%
- US Personal Income (Oct): Consensus +0.3%, previous +0.5%
- UK BoE Inflation Expectations Survey
- Norway Norges Bank governor Olsen speaks
- Germany Factory Orders (Oct): consensus +4.1%yoy, previous +7.9%yoy
- Switzerland CPI (Nov): consensus -0.1%yoy, previous -0.3%yoy
- Czech Republic CA Balance (Q3): previous EUR-196.8mn
- Malaysia Trade Balance (Oct): consensus MYR+9.3bn yoy, previous MYR+8.7bn yoy
- Also interesting: Brazil Inflation (Nov), US Consumer Credit (Oct), Ukraine Official Reserves (Nov)
The above visually via SocGen:
TOP ISSUES FOR THE WEEK AHEAD (via SocGen)
ECB TO PRESENT NEW INFLATION FORECAST
A slightly higher November HICP (0.9% after 0.7% in October) and a dip down in the October unemployment rate to 12.1% (from 12.2%) for the euro area will have eases some of the pressure on the ECB action ahead of Thursday’s meeting. Attention at Thursday’s meeting will centre on the ECB’s inflation forecast which should be lowered from 1.3% yoy for 2014 much closer to our own forecast of 1.0%. For GDP we do not expect material changes from the ECB’s current 1.0% forecast. We do, however, think this will remain an over-optimistic forecast; our own is 0.6%.
At this week’s meeting, the ECB should reiterate its dovish tone but take no fresh actions. In due course, we expect the ECB to offer further LTROs and possibly a 10-15bp cut in the repo rate but not yet. The press conference questions are likely to concentrate on the ECB’s preferences on the type of LTRO it might offer (for
example with a capped rate).
US UNEMPLOYMENT RATE TO HIT MAGIC 7%
The Fed has since backed away from using a 7% unemployment rate as an automatic trigger for the beginning of tapering. Nevertheless, the attainment of that rate, which we expect in this month’s data with a sharp fall from 7.3%, will excite the markets. The improvement in non-farm payrolls should be less dramatic at 150k after 204k. However, with the Fed stressing that its decision to start throttling back on asset purchases is data dependent, good data will naturally cement expectations that the first move cannot be far away. We see that being some time in Q1 2014 with March being the most likely timing.
BoE ON HOLD
The Bank’s policy makers have been very busy of late. On Tuesday last week, the Chancellor asked the FPC to conduct a revue into the role of leverage within the capital framework for UK banks. Then, on Thursday, the FPC announced some measures to cool the rapidly heating housing market.
This has major implications for the path of UK monetary policy. The recent strength of the UK recovery is at least partly attributable to the improving housing outlook, which has led to fears that the MPC would need to tighten policy to prevent the housing market running out of control.
This week it is the turn of the MPC. No-one seriously expects the MPC to tighten policy this week but, looking a little further down the road, the FPC’s use of its macroprudential tools should reduce the pressure on the MPC to address the housing situation with its own rate tool.
OSBORNE TO DELIVER AUTUMN STATEMENT
We presented our detailed preview in last week’s edition. The OBR, the fiscal watchdog, should revise up its forecasts for this year to around 1.5% from 0.6% and next year’s from 1.8% to around 2.5%. As a consequence, the budget deficit forecasts for this year and next should be revised down by about £8bn for each of the two years.
It is likely to rule that the first part of the government’s fiscal mandate (the cyclically current budget being in surplus in five years’ time) is met. There is some small but not insignificant chance that it deems the rule not to be satisfied. However, if that were the case, then the chancellor would simply add some fresh tightening but only in the 2018-19 fiscal year.
The second part of the mandate (the debt to GDP ratio to be falling in 2015-16) has been failed at the last two fiscal updates and is certain to be failed again. The markets will be relaxed about this.
The new fiscal forecasts will also lead to revised gilt issuance forecasts. The UK Debt Management Office should make a modest downward revision for this year’s issuance from £155.7bn to £153.7bn but a much bigger revision for next year from £178.1bn to £152.7bn.
Source: Deutsche, Goldman and SocGen