Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
- Further deluge of data to start the month, Manufacturing PMIs/ISM in focus; digesting solid Japan & Australia CapEx, mixed Asia PMIs, UK House Prices, German Retail Sales, South Korea; awaiting Eurozone CPI, UK Credit Aggregates, Brazil GDP, US Challenger Layoffs, weekly jobless claims, Construction Spending and Auto Sales; ECB minutes and central bank speakers
- Manufacturing PMIs: India strength contrasts with overall mixed Asia profile, Europe and North America likely to echo downbeat flash G7
- UK: Consumer Credit seen posting solid gain, but Mortgage lending and approvals seen weak, as Nationwide warns on increasing headwinds
- Eurozone CPI: national readings point to undershoot for both headline and core, but June and July core likely to rebound on holiday costs
- US Auto Sales seen correcting April surge, drag on headline Retail Sales
- US ADP Employment seen decelerating, Challenger Layoffs also in view as JOLTS rebound underlines continued strength in labour demand
EVENTS PREVIEW
A further deluge of data, headlined by Manufacturing PMIs globally, gets the month underway, as markets digest the US debt ceiling bill getting over its first hurdle, and shift their view back to Fed and other central bank policy outlooks (and by extension rate differentials), and prospects for the global economy. There are the solid gains in both Japan’s and Australia’s Q1 CapEx, some signs of the protracted downturn in South Korea’s Exports, UK Nationwide House Prices and German Retail Sales, along with an unexpectedly sharp 250 bps rate cut in Sri Lanka to digest. Ahead lie Eurozone CPI (already well flagged to be lower than expected), UK credit aggregates, Brazil Q1 GDP, US ADP Employment, weekly jobless claims, Construction Spending and Auto Sales, along with ECB May minutes and a few central bank speakers.
** World – Manufacturing PMIs **
China’s Caixin Manufacturing PMI rebound (50.9 vs. expected 49.5) offered a welcome break from yesterday’s NBS readings and the array of sluggish April data. Elsewhere Manufacturing PMIs are likely to echo the G7 flash readings with pervasive weakness in many countries, above all the EU and UK, with Asian readings once again mixed, as strength in India and Philippines contrasted with weakness in South Korea, Taiwan and Vietnam. The US Manufacturing ISM is seen echoing both the weak flash PMI and the run of regional Fed surveys, and thus little changed at 47.0 vs. April’s 47.1, with Prices Paid expected to slip to 52.3 from 53.2, and the focus above all on Orders and Order Backlogs.
** U.K. – April Credit Aggregates **
UK Net New Consumer Credit is expected to continue to hold up at a respectable £1.5 Bln, but Lending Secured on Dwellings is forecast to remain weak at just £500 Mln, after an unexpectedly weak no change in March, with total Approvals also seen still very subdued at 54K. While Nationwide House Prices fell less than expected (-0.1% m/m), Nationwide also noted that the headwinds for the UK housing market were likely to strengthen in coming months.
** U.S.A. – Weekly Jobless Claims, ADP Employment and Auto Sales **
Yesterday’s sharp rebound in JOLTS Job Openings (10.10 Mln vs. upwardly revised March 9.745 Mln) served as yet another reminder that a) the US labour market remains very tight, and b) being cautious about over-extrapolating about trends from one or two months data, given that pre-pandemic models of economies are a very unreliable predictors of trends given a world economy that is in a major transition. Today’s run of labour statistics are forecast to show the ADP Employment measure dropping back to 170K, with Initial jobless claims edging up to 235K, and the focus within the Challenger Job Cuts on whether the breadth of layoffs in sectoral terms persisted, eminently the rebound in Job Openings serves as a reminder that high levels of layoffs will not necessarily translate into a meaningful or persistent rise in Unemployment. Auto Sales are expected to give back much of April’s surge to 15.91 Mln SAAR with a drop to 15.3 Mln, and per see implying a drop in May headline Retail Sales.
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