Macroeconomics: The Day Ahead for 13 April

  • Busy day for major data, digesting China Trade, UK GDP and activity indicators and robust Australia labour data; awaiting US PPI and weekly jobless claims, India Trade and Industrial Production; BoE Q1 Credit Conditions and Pill speech in focus, ECB’s Nagel also due; UK, Spanish and US debt auctions
  • UK GDP: January strength gives way to strike impacted February for services, construction rebound positive as manufacturing flatlines; Credit conditions survey of greater importance for May rate decision
  • China Trade underline sluggish domestic demand recovery, and export demand holding up better than anticipated as market share of ASEAN export demand increases
  • US PPI to underline pipeline inflation pressures returning to some form of new normal 


A busy day for major data awaits, and perhaps this may be the spark to jolt markets out of thief post-Easter torpor. There are China’s Trade, UK monthly GDP, business activity indicators and RICS House Price Balance along with stronger than expected Australian labour data to digest. Ahead lie India’s Trade and Industrial Production, but the focus will be on US PPI and weekly jobless claims. ECB’s Nagel speaks twice and will doubtless stick to his familiar hawkish narrative on rates and inflation, but it will be BoE’s Pill speech on ‘Developments in the UK economy and monetary policy’ which garners more attention, along with the BoE’s Q1 Bank Liabilities/Credit Conditions Surveys, as markets attempt to second guess whether the MPC pauses its rate hike cycle in May, as many are anticipating. A busy day for govt bond auctions has Spain selling 3, 10 & 24-yr conventionals and 10-yr I-L, UK offering 10-yr and the US rounding off this week’s refunding with $18 Bln of 30-yr, while Delta Airlines and Fastenal head the US earnings run, ahead of tomorrow’s official kick-off of the US Q1 earnings season.


** China – March Trade Balance **

On the surface one might think that the way stronger than expected 14.8% y/y surge in exports sends an encouraging signal on China’s re-opening recovery, but the -1.4% y/y fall in Imports, while smaller than expected suggests domestic demand remains sluggish at best. The 22.5% y/y increase in Oil imports and the jump in refined oil exports (up 59.8% y/y in Q1) are perhaps the best example of these trends. Indeed with Premier Li putting pressure on local govts to boost exports, and many of those offering subsidies to local manufacturers for that purpose, while the likes of South Korea and Japan have seen sharp declines in exports, China is clearly gaining market share among Asia’s exporter, with export growth to ASEAN proving to be very robust.


China exports by region

Per se, there is also little evidence that the stated desire to pivot towards greater domestic consumption, above all in household terms, is getting any traction, and other countries’ attempts to pivot away from reliance on China’s manufacturing not getting much traction thus far.


** U.K. – February GDP **

The run of data was broadly in line with forecasts, with an upward revision to January’s Index of Services to 0.7% m/m vs. prior 0.5% accounting for the slightly better than expected 0.1% q/q for the Dec-Feb period, though the -0.1% m/m for February Services underlined the impact of the array of strikes, which will also weigh on March. Construction was the other bright spot posting a robust 2.4% m/m rebound after falling 1.7% m/m in January, with Manufacturing flatlining over the first two months of the year. Today’s data is unlikely to have much impact on the MPC’s May rate decision, with the BoE’s Q1 Bank Liabilities and Credit Conditions survey later this morning of rather greater significance, and likely to show continued a further tightening of credit conditions, with credit demand and willingness to lend both set to fall. The survey should also capture some of the fall-out from the collapse of SVB, given responses are typically submitted by the end of the third week of the final month of the quarter.


** U.S.A. – March PPI **

Following on from the largely as expected CPI data and FOMC minutes yesterday, today’s PPI are expected to reaffirm that pipeline inflation pressures continue to decelerate sharply at the headline level with a flat m/m reading implying a slide in the headline y/y rate to just 3.0%, while a 0.3% m/m rise in the core ex-Food, Energy & Trade measure is expected to pull the y/y rate down to 3.4% from 4.4%. If as expected or lower, this may be enough for markets to start to discount a smaller probability of a Fed rate hike at its May meeting, but it may also require Retail Sales to fall as expected tomorrow (consensus -0.4% headline, -0.5% ‘Control Group’) to price out a rate hike.

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