Macroeconomics: The Day Ahead for 13 January

  • Digesting China Trade, UK GDP and activity indicators, Swedish and Hungarian CPI, and further markets test of BoJ YCC target; awaiting German 2022 GDP estimate, Eurozone Trade and Industrial Production, US Import Prices and preliminary Michigan Sentiment, as financials get US Q4 earnings season underway; Fed speak and early close for US markets
  • UK GDP: better than expected November GDP most likely a World Cup related boost; underlying picture remains lacklustre, even if worst expectations not being realized
  • China Trade: external demand slowing sharply as expected, while domestic demand remained weak, may take much of H1 2023 to gauge benefits / impact of Zero Covid rollback


Yesterday’s US CPI data was in the end something of any anti-climax with the initial bout of volatility rapidly fizzling out, and leaving markets somewhat in limbo ahead of the February FOMC meeting. There is a relatively busy schedule of data to end the week, though quite heavily frontloaded, with China’s Trade, UK monthly GDP and activity indicators and Swedish CPI to digest, while ahead lie the preliminary estimate of German 2022 GDP, Eurozone Trade and Industrial Production, US Import Prices and provisional Michigan Sentiment. On the events side of the equation, there is the expected Bank of Korea Rate hike to digest, with Fed speak from Harker and ‘former arch dove turned arch hawk’ Kashkari. But the focal point will be the start of the US Q4 earnings season, which as ever kicks off with the big money centre banks and Blackrock. US markets will also see an early close ahead of Monday’s Martin Luther King Day holiday.

Next week sees a busy run of data from China (Q4 GDP, Retail Sales, Production, FAI, Property Investment), USA (Retail Sales, Industrial Production, NY & Philly Fed Manufacturing & NAHB surveys, Housing Starts & Existing Home Sales) and the UK (Unemployment, CPI, Retail Sales), with Japanese Machinery Orders & Trade, Canadian CPI and Australian Unemployment. It also sees the first BoJ policy meeting of the year, the Fed’s Beige Book, December ECB minutes, many central bank speakers, Davos World Economic Forum, OPEC and IEA Oil market reports, and a raft of US and other Q4 earnings.

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

At 0.1% m/m, November GDP was better than the expected -0.2% m/m, with the boost coming from Services (also up 0.2% m/m against expectations of -0.1% m/m), and likely boosted by the World Cup, which may prove to be a temporary boost. But while Industrial Production was in line with m/m expectations, revisions to prior months saw a big miss in y/y terms at -5.1% vs. forecast -2.8%, while Construction Output continues to defy the gloom and doom around commercial and residential real estate, posting a flat m/m reading, but with revisions seeing the 4.0% y/y rate miss forecasts of 5.4%. On balance, and as with the Eurozone, this points to a shallower recession than had been feared, but the underlying growth dynamic of the UK economic with its numerous challenges and rising tax burden remains at best lacklustre.

** China – Dec Trade Balance **

Given the inherent volatility of this series, and the added problematic of trying to gauge the impact of the disruption from the massive surge in Covid-19 cases as the Zero Covid measures were lifted, it would be wise not to over-interpret this month’s data. Suffice it to say that external demand is clearly slowing sharply, as had been expected, while domestic demand remains weak, but will pick up in coming months, though the longer term picture remains cloudy, given that balance sheet resolution and fiscal support measures for the beleaguered property sector will take time, and the benefits may well not be seen until H2 2023.

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