Macroeconomics: The Day Ahead for 13 March

  • Thin day for statistics, digesting UK monthly GDP and activity indicators, awaiting Eurozone Industrial Production; ECB operational framework review accompanies smattering of ECB/Riksbank speakers, as Toyota wage settlement digested; Foxconn and VW top earnings run; Germany, Italy, Portugal & US bond auctions
  • U.K.: modest rebound in GDP as expected, paced by Wholesale/Retail and Construction; economy still likely to continue to flirt with recession

EVENTS PREVIEW

Once the run of UK monthly GDP and activity indicators has been digested, there is little else on the statistical schedule to move markets, with Eurozone Industrial Production the only other item of any real note. In event terms, there is a smattering of ECB and Riksbank speakers and more importantly the results of the ECB’s ‘Operational Framework Review’, with corporate earnings from Foxconn, E.on, Inditex and Volkswagen, while the govt bond auction schedule has Italian 3, 7 & 18-yr, German 10-yr, Portuguese 7 & 18-yr, as the US rounds off this week’s coupon sales with $22 Bln of 30-yr. But it will be the news of Toyota agreeing the biggest wage hike in 25 years which may be the biggest talking point. As is usual no details on the exact size were published, but local analysts suggest something in the area of 4.2-4.3%, possibly as high as 5.0% at the largest companies, Friday’s aggregated data from trade union Rengo will offer more precise details.

** U.K. – Jan monthly GDP, Index of Services, Industrial Production & Construction Output **

There were very few surprises in this set of activity data, with GDP rebounding a still tepid 0.2% m/m as expected, paced mostly by a 0.18 ppt contribution from Wholesale/Retail to Services (0.2% m/m) and a positive from Health services (0.05 ppt), while manufacturing flat lined, with an unexpected rebound in Construction 1.1% m/m probably largely due to the warmer January weather. The constraints on the economy remain all too obvious: a high tax burden, chronic labour skills shortages, domestic political uncertainty constraining investment, and the general lack of visibility about the global economic outlook – an interest rate cut or cuts would likely do little to change this materially, even if it would offer a psychological boost.

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