Macroeconomics: The Day Ahead for 16 December

 A very busy day for data with US and UK labour reports topping the agenda, and accompanied by G7 and India flash PMIs, and US Retail Sales. The continued theme of ambiguity in regards to US (and other countries’) policymaking is once again in evidence as the US suspended the much trumpeted technology investment pact with the UK, as it tries to force further concessions from the UK on non-tariff barriers outside the realm of technology.

** U.K. – Oct/Nov Labour data **

– A somewhat mixed set of labour data, but overall it underlines a continuing deterioration in labour market conditions, with Payrolls falling a larger than expected 38K, while the core Private Average Weekly Earnings ex Bonus measure fell slightly less than expected to 3.9% from 4.2%, and the ILO Unemployment Rate edged up to 5.1% as forecast. Barring a very unexpected rise in tomorrow’s CPI, the underlying trend should be enough for BoE governor Bailey to line up with doves at Thursday’s final MPC meeting and vote for a 25 bps cut.

** U.S.A. – Oct/Nov Labour data / Oct Retail Sales **

Parsing the labour report will be a little more complicated, with a full report for November, but only partial data for October. But forecasts assume a 50K increase in Nov Payrolls, and the Unemployment Rate to rise to 4.5% from September’s 4.4%, the latter effectively a post hoc validation for last week’s rate cut, even if one would have to underline that the September rise was primarily due to a rise in the size of the labour force. The chances of an outlier, which may well see a sizeable revision in later editions of the report, especially as the reliability of the data will be open to question, advises against grandstanding about labour market trends. But markets are always fond of binary judgements, even if the accompanying rationale for price reaction may look to be a case of self serving cherry picking of the full report. Gasoline and Autos are expected to be a drag on headline Retail Sales (for October), with a marginal 0.1% m/m increase forecast, but core and the ‘Control Group’ measures are seen accelerating to 0.4% m/m, after lacklustre September readings.

** G7/India – Nov flash PMIs **

– Japan’s PMIs painted a less upbeat picture of the economy than yesterday’s robust Q4 BoJ Tankan, but the rebound in the Manufacturing PMI at least echoes the direction of the latter, while India’s PMIs continued to point to robust growth, but underline that trade tensions with the US continue to create headwinds, along with the longer standing issue of infrastructure bottlenecks. We have previously noted the erratic behaviour of Eurozone PMIs, with the sharp rebound in the French Manufacturing PMI (50.6 vs. 48.1) seemingly at odds with other anecdotal evidence, and more than likely with Thursday’s national business confidence surveys, while the drop in the German Manufacturing PMI echoes an array of other surveys and anecdotal evidence suggesting that Deutschland AG has lost faith in the ability of the Merez led coalition government to address many of the structural headwinds to the German economy. Forecasts for the UK and US PMIs anticipate little change.