Macroeconomics: The Day Ahead for 20 January

  • Modest schedule of data to end the week as East Asia winds down for Lunar New Year holidays; digesting weak UK Retail Sales & GfK Consumer Confidence, German PPI; awaiting US Existing Home Sales, Canada Retail Sales; plenty of ECB and Fed speakers; SLB & State Street top US earnings
  • UK Retail Sales & GfK Consumer Confidence misses serves as timely reminder that UK economic headwinds remain considerable
  • US Existing Home Sales: further fall expected given November Pending Home Sales fall; inventories still low, but cancellation rates rocketing


As China and East & SE Asia wind down for the Lunar New Year holidays, the week ends with a relatively modest schedule of data and events. There are Japan’s national CPI, German PPI, UK GfK Consumer Confidence and Retail Sales to digest, with US Existing Home Sales and Canadian Retail Sales ahead. As expected China left both 1 & 5-yr Loan Prime Rates unchanged, with a further busy run of Fed and ECB speakers ahead, including Lagarde (again) and perhaps more interestingly the ever thoughtful Fed’s Waller. Oilfield services giant SLB (aka Schlumberger) and State Street top the limited run of corporate earnings. The higher than expected German PPI, whilst still posting a m/m fall of -0.4% m/m and a further sharp deceleration in y/y terms to 21.6% from November’s 28.2% should serve as a reminder that while pipeline pressures are easing, they remain high cumulatively, and per se continue to put pressure on core Services CPI.

Next week’s schedule as is typical for the fourth week of the month is replete with surveys, including the G7 flash PMIs, Germany’s IFO Business Climate and numerous other Business and Consumer Confidence measures, but the advance estimates of Q4 GDP in the US, South Korea and Spain will inevitably get top billing. Japan’s Tokyo and Australian CPI, UK PPI feature in terms of inflation data, while the US also has monthly Personal Income/PCE, Durable Goods Orders, New and Pending Home Sales and Goods Trade Balance. On the central bank front, the Fed enters its purdah period ahead of the next FOMC meeting, the Bank of Canada is expected to hike a further 25 bps to 4.50% with all eyes on whether it signals a pause. Elsewhere 100 bps rate hikes are seen in Colombia (to 13.0%) and Nigeria & Pakistan (both 17.0%), 50 bps in South Africa (7.50%), and rates are seen on in Chile, Hungary and Sri Lanka. In the commodity space, Brazil’s Unica is due to publish its monthly Sugar S&D report, while the USDA reports on US Cattle, Meat and Milk inventories.

** U.K. – Jan GfK Consumer Confidence & Dec Retail Sales **

Retail Sales were much worse than expected at -1.0% m/m vs. a forecast of 0.5%, and have fallen in 12 of the past 14 months, with only one increase registered in October. Weakness was relatively broad based with exception of clothing & footwear, which may have gotten a boost from the very cold December weather, while an expected boost from Black Friday/Cyber Monday sales failing to materialize. After a modest 3-month recovery, GfK Consumer Confidence reversed course to -45 from -41, with a sharp fall in the major purchases climate to -40 from -34 the main driver, along with a fall in the Economic Situation over the past 12 months (-71 vs. -66). It serves as a reminder that the better than expected run of economic activity data in recent weeks has been a case of ‘better, but still weak’, and that the UK consumer and the broader economy continues to face a lot of headwinds.

** U.S.A. – Dec Existing Home Sales **

The week’s run of housing data has not been as bad as consensus forecasts had assumed, but continue to deteriorate, with today’s Existing Home Sales seen down 3.4% m/m to a SAAR rate of 3.93 Mln, and if that estimate is correct, it would mark the eleventh consecutive fall. Inventories of unsold homes remain low by historical standards, but cancellation rates (on initially agreed sales) have soared, and underline the affordability and mortgage rate headwinds.

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