Macroeconomics: The Day Ahead for 11 March

A busy week for statistics gets off to a quiet start, with Japan’s final Q4 GDP, the UK KPMG/REC report on employment trends and Norwegian CPI along with Saturday’s China CPI and PPI and yesterday’s Saudi Aramco results to digest, and only the US Feb NY Fed 1-Yr Inflation Expectations survey ahead. The events schedule is also light as Eurogroup Finance Ministers meet, accompanied by Poland’s NBP inflation report, and President Biden’s Budget proposal, much of which will prove to be ‘dead on arrival’ in terms of its chance of getting approval in Congress (regardless of the election). As equity markets appear to be succumbing to a sense of vertigo, talking points aside from the week’s focus on US CPI will be ‘sources’ suggesting that the BoJ may exit negative rates at next week’s policy meeting, with this week’s Rengo (trade union) data on negotiated wage settlements perhaps key to that decision, along with a sense of disappointment at measures to boost China’s economy announced at the National People’s Congress, which concludes today.

RECAP: The Week Ahead – Brief Preview:  

China’s mixed inflation data have got a busy week for major statistics in the US, UK and India under way, as Ramadan begins. The Fed will be in purdah ahead of next week’s FOMC meeting, thus reducing the volume of central bank speakers. In the commodity space, the focus will be on the run of monthly Oil Market Reports from EIA, IEA and OPEC, with another busy run of conferences including China’s MySteel Iron Ore Conference. The US leads a busy run of govt debt issuance with 3, 10 & 30-yr, with the UK, Germany, Italy, Netherlands, Portugal, Japan and Canada also holding auctions. Adidas, ADM, Aramco, CATL, Foxconn, Inditex and Volkswagen are among the headliners for the week’s run of corporate earnings.

U.S.A. – CPI tops the run of data with the consensus currently looking for headline at 0.4% m/m for an unchanged 3.1% y/y, while core is seen up 0.3% m/m, y/y to dip back 0.2 ppt to 3.7%, directionally improving, but likely to keep the Fed cautious given elevated 3-mth annualised rates; PPI is seen rising more modestly. Retail Sales are projected to reverse January’s drop with a rise 0.8% m/m, with core measures seen up 0.3%/0.4%. Industrial Production is seen flatlining, but Manufacturing Output should largely reverse January’s fall with a rise of 0.4%. Michigan Sentiment, NY Fed Manufacturing and NFIB Small Business Optimism surveys, Import Prices and Treasury Budget complete the data run, while there are further Presidential primaries, and the White House will issue its Budget proposals.

China – CPI at 1.0% m/m 0.7% y/y was a lot higher than expected, but a combination of an LNY jump in travel costs, and a sharp base effect in food prices allied with the impact of adverse weather accounted for much of the jump, which is likely to prove temporary, particularly given the setback in PPI to -2.7% from -2.5% y/y. Credit measures are expected to slow to below average levels after January’s surge, with the LNY holiday also tempering credit demand, and March data more likely to see some support from the Reserve Requirement Ratio cut. Friday’s New and Used Home Prices should also see some improvement after the 5-yr LPR cut, but may still be down in m/m terms. No change in the PBOC’s 1-yr MTLF are expected, with a modest volume boost expected. The National People’s Congress concludes on Monday, but Premier Li will not be giving the customary concluding speech.

UK – Tuesday’s labour data are forecast to show a modest 25K rise in HMRC Payrolls and a tepid 5K rise in LFS Employment, with the Unemployment Rate expected to remain very low at 3.8%. But the focus will be on Average Weekly Earnings, within which headline is expected to ease fractionally to 5.7%, but ex-Bonus to remain very elevated at 6.2%. Wednesday’s monthly GDP for January is expected to post a rebound of 0.2% m/m, echoing improving survey data, and paced by a similar rise in the Index of Services, while Industrial Production is forecast to be unchanged, and Construction Output to ease -0.1% m/m. The RICS House Price Balance should continue to improve, but remain negative at -10 vs. prior -18. The BoE’s Financial Policy Committee meets with no changes expected.

Japan – Following the much stronger than expected Q4 CapEx data, Japan’s Q4 GDP is seen revised up from -0.1% to 0.3% q/q, paced by a sharp revision to Business Spending from -0.1% q/q to +2.4%, though Private Consumption should be unrevised at -0.2% q/q. PPI is forecast to edge up 0.1% m/m, but rise to 0.6% in y/y terms, as all eyes turn to next week’s BoJ policy meeting.

India – CPI is expected to be little changed at 5.07%, though easing Food Prices and a likely further drop in core CPI impart some downside risks to the consensus estimate, which at the margin could prompt the RBI to tone down its hawkish bias. Industrial Production is finally expected to some stability as holiday timing base effects are removed from the equation, with a modest pick-up to 4.1% y/y from 3.8% expected, with surveys imparting a slight upside risk. WPI and Trade data are also due.

Latin America will look to Brazilian and Argentine inflation, Brazilian Retail Sales and Mexican Industrial Production.

Corporate earnings highlights for the week as compiled by Bloomberg News are likely to include: Adidas, Adobe, Archer-Daniels-Midland, Assicurazioni Generali, Contemporary Amperex Technology, Dollar General, Dollar Tree, Dr Ing hc F. Porsche, E.ON, East Money Information, Foxconn Industrial Internet, Hapag-Lloyd, Hon Hai Precision Industry, IndiTex, Lennar, Ping An Bank, Saudi Arabian Oil, Ulta Beauty, Verbund, Volkswagen.