Macroeconomics: The Day Ahead for 15 March

  • UK Budget and busy run of US and China data in view as SVB furore starts to fade; digesting China activity and property data, Swedish CPI, BoJ minutes; awaiting US Retail Sales, PPI, NY Fed Manufacturing and NAHB surveys, Eurozone Industrial Production, India Trade; IEA monthly Oil Market report and US EIA weekly inventories; Germany & Canada debt sales
  • China: Retail Sales and Industrial Production in line with forecasts, echo PMIs, FAI beats forecasts on infrastructure despite drag from nevertheless improving property sector; rise in Unemployment underlines need for further momentum to build
  • UK Budget: OBR report likely to upgrade near term growth, but revise down longer-term leaving Hunt with limited fiscal headroom; very technical ‘tinkerman’ budget likely, many measures already ‘leaked’
  • US Retail Sales: reactive correction to January surge expected, led by autos setback, watch revisions
  • US NY Fed and NAHB surveys: modest setbacks expected


A busy day for statistics awaits, as the initial future over the SVB/Silvergate/Signature bank failures starts to settle and fade, and following the non-reaction to the slightly higher than expected US core CPI print yesterday, suggesting that markets are back in their Fed pivot mindset. There are China’s Retail Sales, Industrial Production, FAI and Property Sales and Investment along with Swedish CPI to digest. Ahead lie US PPI and a barrage of activity indicators via way of Retail Sales, NY Fed Manufacturing & NAHB Housing Market surveys, and Business Inventories, which are accompanied by India Trade Balance and some Canada housing indicators. The UK Budget tops the events schedule and follows the as expected no change China monthly 1-yr MTLF operation, while the IEA rounds off this month’s round of Oil Market reports. A lighter day for govt bond issuance has auctions of 27 & 30-yr in Germany, and 10-yr in Canada.

** China – Retail Sales, Industrial Production, FAI & Property indicators, 1-yr MTLF **

Both Retail Sales and Industrial Production were broadly in line with forecasts, recovering from the disruption of the surge in infection rates in December, as Zero Covid restrictions were rolled back, and echoing the more timely PMIs. By contrast Fixed Asset Investment (FAI) at 5.5% y/y beat expectations of 4.5%, with a 9.0% y/y jump in Infrastructure investment more than offsetting a continued drag from Property Investment, which at -5.7% was also better than an expected -8.3%. Other property sector indicators also showed a marked improvement with overall Property Sales down 3.6% y/y, but masking a sharp turnaround in Residential Property Sales to 3.5% y/y from December’s -28.3%, even if base effects clearly flatter that improvement. Nevertheless, it does signal a turnaround in the fortunes of the sector, particularly given that this time of the year marks the highpoint for debt refinancings and repayments in the sector. The PBOC’s determination to continue to boost liquidity in the economy was again signalled by a fourth consecutive net injection at its 1-yr MTLF operation, with the rate again held at 2.7%, but the total volume was above forecasts at CNY 481 Bln against forecasts of CNY 325 Bln. While hardly signalling a strong rebound in Q1 GDP (likely to be around 3.5% y/y), the data do signal that the economy is regaining some traction, but with the Unemployment Rate rising to 5.6% against forecasts of a drop to 5.3%, more momentum is needed to improve labour demand, which should then serve to give a boost to private consumption, as the Chinese authorities intend.

** U.K. – Budget 2023 **

As is very often the case, many of the measures that Chancellor Hunt will announce in today’s Budget have been ‘leaked’, and leave the general impression that this is going to be a rather technical or ‘tinkerman’ budget. The OBR report should see a relatively sharp revision to it’s 2023 GDP forecast from a very pessimistic -1.4% in November to around flat, but as a quid pro quo, it will likely revise down projections for the years ahead, per se giving Mr Hunt rather less in the way of ‘fiscal headroom’ than the £30 Bln lower than expected PSNB for FY2022/23 would suggest. It is likely that the household energy bill cap will be kept at £2,500 rather than rise to £3,000 as originally planned, with an extension of current subsidies. An increase in the annual tax free pensions savings cap and a rise in the lifetime allowance, along with a further extension in the freeze on fuel duty. Some adjustments to business’ capital allowance for writing off eligible CapEx against taxable profits to marginally cushion against the sharp rise in corporation tax to 25% from 19% and the expiry of the 130% tax relief on equipment purchases are also expected. A series of measures to try and encourage people back to work, and to help with the prohibitively high cost of childcare in the UK have also been flagged. But nothing in the budget is likely to change the view that the UK faces a protracted period of sluggish growth.

** U.S.A.. – Feb Retail Sales, PPI; March NY Fed Manufacturing & NAHB Housing Market Index **

– Retail Sales will to a certain extent be sensitive after January’s unexpected 3.0% m/m headline surge, with headline seen dipping -0.4% m/m mainly due to a reactive correction in auto sales, while core measures are seen down -0.2%, which would be a modest correction to January’s jump, though as ever revisions to prior month readings will need to be watched and can be quite sharp. After little reaction to yesterday’s CPI, today’s PPI is expect to ease in m/m headline terms to 0.3%, with the ex-Food & energy measure seen up 0.4%, boosted by Services ex-Trade, though in both cases this should a further dip in y/y rates to 5.4% and 5.2% respectively. After a much sharper than expected rebound to -5.8 from -32.9 in February, the consensus looks for a modest setback to -7.8, predicated by rising interest rates and the fading impact of easing supply chains. Last but not least, the NAHB Housing Market Index is seen expected to slip back after to 40, after recovering from December’s cyclical low of 31 to 42 in February. The rebound in mortgage rates, and still very challenging affordability forcing home builders to cut prices are expected to weigh.  

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