Macroeconomics: The Day Ahead for 18 November

  • Modest run of data to end the week: digesting UK Retail Sales, & GfK survey, Norway GDP and Japan CPI; awaiting US Existing Home Sales, Canada House Prices & PPI; smattering of central bank speakers
  • UK: dead cat bounce in Retail Sales and further slight recovery in Consumer Confidence offer little solace in the wake of grim Budget
  • US Existing Home Sales: further accelerated sharp fall seen, SAAR pace excluding pandemic seen at 2011 levels; inventories in view

EVENTS PREVIEW

The day’s data calendar is modest, though there are Japan’s National CPI, UK Retail Sales and GfK Consumer Confidence and Norwegian Q3 GDP to digest ahead of Chile’s Q3 GDP, Canada PPI and perhaps more significantly Teranet House Prices and US Existing Home Sales. There are quite a number of central bank speakers, though the latest very hawkish comments from Bullard yesterday suggesting that Fed Funds ‘sufficiently restrictive zone’ (i.e. to bring down inflation) is in the 5.0%-7.0% area will be the talking point, allied with continued concerns about the ongoing surge in Covid cases in China. Next week’s schedule will be disrupted by the US Thanksgiving day holiday, with G7 flash PMIs the likely highlight of a light statistical schedule, which also has Germany’s Ifo and other national surveys in the UK and Eurozone, US Durable Goods and New Home Sales, UK PSNB, Canadian Retail Sales and Japan’s Tokyo CPI. On the events front, the OECD updates its economic outlook forecasts, with the November FOMC minutes, and rate hikes expected in South Korea (+25 bps) and South Africa (+75 bps), and a jumbo 150 bps rate cut in Turkey.

** U.K. – Nov Gfk Consumer Confidence, Oct Retail Sales **
Following on from yesterday’s grim but very much largely as expected UK Budget, whose tax measures will primarily serve to continue a process of hollowing out the UK’s middle classes, which has been a sadly observable work in progress for more than a decade, today’s data falls into the category ‘better than expected, but still weak’. The 0.3% m/m rebound in Retail Sales ex-Autos was no more than a very dead cat bounce, given the 1.5% m/m fall in September and a 1.7% m/m drop in August. The pick-up in GfK Consumer Confidence to -44 vs. expected -46 was across the board in terms of views on Buying Climate, Personal Finances and Economic Situation, and probably owes to nothing more than a typical feature of diffusion indices, namely a small shift of those responding ‘no change’ vs. previously saying ‘worse’. The fact remains that the headline index remains close to its recent all-time low, and below the prior all-time low.

** U.S.A. – Oct Existing Home Sales **
Existing Home Sales are expected to fall for an eighth consecutive month, and at an accelerated pace of -6.6% m/m, the largest fall since February’s -8.6%. The anticipated 4.40 Mln SAAR pace would be the weakest since the pandemic trough in May 2020, and rather more notably the worst since 2011 excluding the pandemic. A close eye will also need to be kept on inventories, which at 3.3 months’ worth of supply remain low by historical standards, though a lot higher than January’s low of 1.6. Housing will continue to be a significant drag on GDP going forward, above all given that the mortgage rate has risen to 7.2%.

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