Macroeconomics: The Day Ahead for 29 November

It is month end, making for a very busy schedule of statistics, though with an early close in the US, due to the Thanksgiving holiday, reaction to any outliers may be more muted, and in any case perhaps reflective of month end rebalancing. There are Japan’s Tokyo CPI and Retail Sales, Korean and Japanese Industrial Production, UK Lloyds Business Barometer, French CPI and Consumer Spending to digest. Ahead lie German Unemployment, UK Consumer Credit and Mortgage Lending, Eurozone and Italian CPI, Eurozone Inflation Expectations, along with Indian and Canadian Q3 GDP. On the central bank front, the BoE publishes its Financial Stability Review and minutes of the quarterly BoE FPC meeting, with ECB’s de Guindos the only scheduled speaker. UK Credit aggregates are expected to remain at relatively robust levels, with Consumer Credit seen edging up to £1.3 Bln and Mortgage Lending pickup to £2.7 Bln, despite a marginal drop in Approvals to 65.0K. As for Japan’s Tokyo CPI, the larger than expected rises in headline and ex-Fresh Food were paced by the ending of household energy subsidies, but ex-Food & Energy was in line with forecasts at 1.9% y/y, high and close to target, but on the other hand not making an overwhelming case for a December rather than January rate hike, especially with the recent strengthening of the JPY. On the other hand, the BoJ will be mindful of not wanting to prompt another bout of market volatility as it did in July and use the opportunity of markets discounting a rate hike, though currently that stands only at 60% for December, and is not fully discounted until March. More JPY volatility seems likely.

** Eurozone – November CPI **

– The marginal m/m downside miss on France and Spain’s HICP, and a much lower than expected -0.7% m/m 2.4% in Germany, skews the risk to the downside of the expected m/m drop of -0.2% m/m, which due to those adverse base effects in household energy and road fuel costs would push the headline y/y back up to 2.3% from 2.0%, with core CPI also seen edging up 0.1 ppt to 2.8% y/y. As previously noted, that rise is unlikely to be a show stopper for a now heavily discounted December ECB rate, but the debate at the ECB is about where the neutral rate is, and whether rates need to end up in accommodative territory, with Villeroy yesterday countering Schnabel’s rather hawkish comments earlier this week, essentially saying rates need to get back to neutral as soon as possible, keeping the door open for a larger 50 bps cut in December, and poignantly adding that negative rates should remain in the ECB’s toolkit.

** India – Q3 GDP **

– Restrictive RBI monetary policy (both high interest rates and tighter lending standards) along with a slower than expected pick-up in government spending (above all relative to what has been budgeted) are expected to weigh on Q3 GDP and GVA, with both seen slowing to 6.4% y/y from 6.7% and 6.8% respectively, with some downside risks. This should however prove to be the low point for the slowdown, with early indications for Q4 suggesting a pick up in the rural economy and govt expenditure, as well as corporate borrowing and equity issuance. 

** China – November NBS PMIs **

– Given the run of poor corporate earnings, very evident in last week’s results from Baidu and PDD. it seems likely that Industrial Profits will fall further into negative territory (last -3.5% y/y). But markets will be more sensitive to Saturday’s NBS PMIs, which are forecast to post very marginal gains to 50.2 for Manufacturing and 50.4 for Services, implying that the boost from the run of stimulus measures has been very modest thus far, with both consumer and business confidence remaining low.