Macroeconomics: The Day Ahead for 10 March

  • Digesting better than expected UK GDP and China lending data, as expected no change from BoJ and Norway inflation undershoot, focus on US labour report, Canada jobs and Indian Industrial Production also due, smattering of ECB speakers; SVB bank rights issue fall-out also in view busy week ahead with ECB meeting and raft of US and China data
  • UK GDP: boost from education and healthcare likely transient; manufacturing, construction and other services activity underline sluggish growth outlook, unlikely to weigh much in divided MPC’s deliberations
  • US labour report: solid payrolls growth expected, risks two-sided, Average Earnings the likely focal point


A very busy end to the week has the as expected no change BoJ rate decision, Japan Household Spending and PPI, UK monthly GDP and the array of activity indicators, Norwegian CPI and French Trade to digest. But the primary point of focus ahead will be the US labour data, which are accompanied by Canadian Unemployment and Indian Industrial Production. There is a smattering of ECB speakers, but with the ECB meeting looming in the headlights for next week, they are likely to merely recycle already well established positions. Rather more attention will be paid to the fall-out from the unexpected rights issue announcement from US’s Silicon Valley Bank, and whether this hints at the rapid Fed policy tightening starting to bite. Outside of the ECB meeting, next week brings the heavily anticipated UK Budget and a deluge of US and China statistics. This includes US CPI, PPI, Retail Sales, Industrial Production, Housing Starts, NAHB, NFIB, NY & Philly Fed Manufacturing surveys and preliminary Michigan Sentiment, with China looking to Retail Sales, Industrial Production, FAI and an array of property sector indicators, while the UK looks to labour data and BoE/Ipsos Inflation Expectations, Japan has Machinery Orders and Trade, Australia labour data and India CPI.

** U.K. – January GDP and activity indicators **

Wile monthly GDP was better than expected at 0.3% m/m against expectations of a rise of 0.1% m/, and paced by a sharper than expected 0.5% m/m rise in the Index of Services, the quarter to January data were flat as expected, underlining that the economy is showing some resilience, but remains at best sluggish. It was primarily driven by children returning to school after a sharp drop in attendance in December due flu outbreaks and other illnesses. But both Construction Output, which dropped 1.7% m/m, and Manufacturing Output down 0.4% m/m, were weaker than expected and outside of health and education, services growth was sluggish. The data are unlikely to weigh heavily in the BoE’s March rate decision, with next wages data and the following week’s CPI readings likely to figure rather more in the divided BoE’s decision, a 25 bps still looks the most likely outcome.

** U.S.A. – February labour report **

Given the size of the ADP misses relative to Private Payrolls over the past months, there is little to impute from the solid 242K rise. But with JOLTS Job Openings remaining sky high at 10.82 Mln in January, and weekly jobless claims super low at 195K in the week of the establishment survey, the unseasonably mild weather, and the structural shortages in both construction and education sectors, the risks would again appear to be to the upside of the 225K headline Payrolls consensus, though not likely to the extent of January’s 517K outlier, which for a change may be revised lower. The one obvious negative is the consistently high level of layoff announcements in recent months, above all in the tech sector, though latterly also starting to show up in non-tech, which will typically show up with a lag. The Unemployment Rate is seen holding at a 54-yr low of 3.4%, though the focus will be more on the Underemployment Rate which only inched up marginally from an all-time low of 6.5% to 6.6% in January, along with the Participation Rate, which has recovered again in recent months, but at an expected 62.4% remains a full percentage point below pre-pandemic levels. However, markets will above all zero in on Average Hourly Earnings, with the m/m rate seen easing slightly to 0.3%, which would edge the 3-mth annualized rate down to 4.4% from 4.8%, still too high for the Fed’s comfort, even if clearly not indicative of a wage price spiral. Given that markets have moved to price a relatively high near 70% risk of a 50 bps hike in March, above all following Powell’s warnings this week, the wages data along with next week’s CPI (consensus 0.4% m/m headline and core, to edge headline y/y down 0.4 ppt to 6.0% and core 0.2 ppt to a still very lofty 5.4%) will likely be pivotal in deciding expectations on the size of the hike at the 22 March FOMC meeting. But given next week’s CPI and other major data event risk, today’s labour data would have to be very weak to offer markets much comfort on the rate outlook, and even if were, it would be very tenuous to argue that one month’s data signals a clear easing in labour market conditions (the FOMC will certainly adopt that view).

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