Macroeconomics: The Day Ahead – 26 January 2021

Good Morning: The Long & the Short of it and The Bigger Picture

Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist

  • Digesting South Korea GDP, UK labour market data and Singapore Industrial Production, awaiting UK CBI Retailing, US Consumer Confidence, Richmond Fed surveys and House Prices, IMF World Economic outlook; deluge of US bellwether corporate earnings; busy for govt debt auctions
  • US Consumer Confidence seen posting marginal rebound, labour market perceptions likely to be key swing item
  • China: PBOC induced liquidity squeeze a further sign of considerably less accommodation in policy terms


The data and earnings schedule heats up today, with South Korea’s slightly better than expected Q4 GDP and UK labour data to digest ahead of the UK CBI Retailing survey, US Consumer Confidence & Richmond Fed surveys, both FHFA & CaseShiller House Prices and Brazil’s IPCA-15 inflation ahead, along with the IMF’s latest World Economic Outlook. A busy day for govt bond sales with the UK, Italy and US all holding auctions, while the US corporate earnings schedule is replete with bellwether names: AMD, American Express, ADM, Freeport-McMoRan, General Electric, Johnson & Johnson, Lockheed Martin, Microsoft, NextEra Energy, Starbucks, Texas Instruments and Verizon among the highlights. Eminently the focus continues to remain on pandemic related news, vaccines roll-outs being primus inter pares at the current juncture, along with emergent doubts on the timing and size of any further US fiscal stimulus. What is striking both about pandemic and Brexit related news is that a broad swathe of governments appear to have no politicians that are capable of displaying even a very basic understanding of logistics and supply chains. If as a politician you wish to convey a message of hope in such desperately dire times as these, then at least show some awareness of the challenges involved in delivering solutions, otherwise either keep quiet or, step away and let someone who does, take over. The IMF’s latest Global Economic Outlook will be of some interest, above all the extent of any push back on 2021 forecasts, above all in Europe due to extended lockdown measures and slow vaccine roll-out, but also if it follows the World Bank in highlighting a weakening of long-term potential growth rates in the developed world. A close eye also needs to be kept on China’s markets as tight liquidity conditions has driven up short-term money rates very sharply, with the PBOC surprisingly draining liquidity on a net basis, unusual in so far as it typically adds liquidity ahead of the Lunar New Year holiday to avoid such short-term squeezes. The hawkish noises from PBOC adviser Ma Jun warning about asset price bubbles, and advocating a shift from GDP to inflation and employment targeting, along with measures by some Chinese cities to clamp down on property price inflation suggests a marked shift to a less accommodative policy backdrop; leaving aside the clampdown on some of China’s tech behemoths.


U.S.A. – Jan Consumer Confidence

The consensus looks for a ‘dead cat bounce’ in Consumer Confidence to 89.0, after sliding from October’s 101.4 to 88.6 in December, with the latter above all paced by a sharp drop in the Labour Differential (Jobs Plentiful minus Hard to Get) to -0.2 from November’s 6.9. How the passage of the December stimulus bill, the Washington insurrection on January 6th, Biden’s proposals for a further stimulus package, higher gasoline prices, a still very high infection and mortality rate and the vaccine roll-out play out against each other is difficult to call, but labour market perceptions will play a key role in determining the outcome, with items such as the Atlanta Wage Growth Tracker suggesting little improvement, though surveyed employment indices have seen some improvement.


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