Macroeconomics: The Day Ahead for 17 February

It will be a relatively quiet end to the week if the light data and events calendar is anything to go by, with markets getting a timely reminder this week that the path lower on inflation is going to be a bumpy one, and that prior assumptions about a Fed or other major central bank rate ‘pivot’ in H2 or even Q4 was always going to look rather tenuous. It will be interesting to see if there are other Fed speakers in the coming days that echo non-voting Bullard and Mester’s comments yesterday that they saw a ‘compelling’ (Mester) case for a 50 bps hike at the Feb 1 meeting, and that it would be better for the Fed to overshoot and reverse if necessary The statistical calendar amounts to little more than digesting the overnight UK Retail Sales, German PPI (falling less than expected) and Singapore Exports data (weaker than expected on the back of sharp drops in exports to both China and the US), while ahead lie US Import Prices and Canadian PPI. There is a light smattering of ECB and Fed speakers, while Deere & Co tops the corporate earnings schedule with Allianz, Air France-KLM, Lenovo, NatWest, Swiss Re also featuring in Europe/Asia, with North America also looking to Autonation and Yamana Gold.

Next week sees the first anniversary of the Russian invasion of Ukraine, while Carnival will thin out markets in Germany and Brazil to start the week. Surveys dominate the data schedule, most notably G7 flash PMIs, Germany’s Ifo and ZEW, UK CBI surveys, and Eurozone, UK and German Consumer Confidence. The US has New and Existing Home Sales, PCE & Personal Income, and the first revision to Q4 GDP, the UK has PSNB and Rightmove House Prices, Canada CPI, Australia Q4 Wages and Private CapEx, with inflation data due from Brazil and Mexico. On the central bank front New Zealand’s RBNZ is seen hiking rates a further 50 bps to 4.75%, with the Bank of Korea and Turkey’s TCMB seen holding rates, and China’s 1 and 5-yr Loan Prime Rates also seen unchanged at their monthly fixing. 

There are the February 1 FOMC minutes and another rash of central bank speakers, while livestock markets look to USDA data on Cattle on feed, Poultry Slaughter and Red Meat Production.

** U.K. – January Retail Sales **

Some welcome good news for the UK economy came via way of the better than expected 0.5% m/m rise in Retail Sales against expectations of a drop of -0.2% m/m, with Household Goods bargain hunting providing the boost. That said the rebound came after drops of -1.2% m/m and -0.6% m/m in prior months, as such the rebound was modest, and it would be tenuous to argue that this marks a turnaround in underlying consumer spending trends. But it does signal some resilience in the face of the cost of living crisis, and fits with the idea that the likely recession will be shallow.

** U.S.A. – January Import Prices **

Following on from the upside surprises on CPI and PPI, there is a risk of another surprise on today’s Import Prices, which assumes a downward pull from Goods prices. Reading across from PPI (not always that well correlated, even accounting for USD effects), food prices should exercise downward pressure, but petroleum will act as a counterweight, and in all likelihood, non-petroleum goods prices will not be the downward drag that many had assumed given that sharp rebound in Goods PPI.