Good Morning: The Long & the Short of it and The Bigger Picture - 11 January 2019 - ADM ISI
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Ostwald, Marc
08:35 (3 hours ago)
to Marc
- Digesting better than expected Australia Retail Sales & French BoF
Industry Sentiment, weak Japan Household Spending; awaiting UK monthly
GDP and raft of activity data along with US CPI; ECB speakers and
Italy BTP auctions
- UK GDP: marginal expansion expected, some upside risks if Production
and Construction rebound more than expected from October slump
- US CPI: gasoline and energy to weigh on headline CPI, but robust
Services CPI to underpin core
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** EVENTS PREVIEW **
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UK data tops the day's schedule, along with US CPI data which will be published as it is compiled by the Bureau of Labor Statistics which was funded back in September and is therefore not subject to the shutdown, which for the record books will be the longest ever shutdown if it continues until Saturday. (Just for reference, this a list of what is open and what is closed in terms of statistical depts., see
http://www.pewresearch.org/fact-tan...casualties-of-the-federal-government-shutdown). Outside of the that run of UK monthly GDP, Trade, Industrial Production and Construction Output, there are also the overnight Australia Retail Sales, Japan Household Spending and Turkish Current Account, with the only other item with market moving potential looks to be Indian Industrial Production. Italy rounds off a very busy week for Eurozone govt bond issuance with max. EUR 6.5 Bln total of 3, & & 30-yr BTPs.
** U.K. - Nov monthly GDP, Industrial Production, Trade & Construction Output **
- Eminently, the Brexit debate in parliament is of far greater significance than today's run of data, though one might well argue that, given the protracted period of uncertainty which shows no sign of imminent resolution, the UK economy has not slipped into recession, and that demonstrates a degree of resilience. Be that as it may, November monthly GDP is seen posting another meagre 0.1% m/m gain as it did in October, predicated on a similar sized rise in Services, which would see the q/q rate dip to 0.3% from 0.4%, which in annualized terms would be around the 1.2% pace that will likely be the outcome for 2018 GDP. There is perhaps a modest upside risk, if the Industrial Production & Construction Output data rebound a little more strongly than the 0.2% m/m consensus, after posting quite sharp falls in October, though this would merely confirm that the October fall was rather exaggerated. The accompanying Trade data are also expected to post a marginal narrowing from October's levels, but it is the growth rates for exports (Oct 0.8% m/m) and Imports (3.5% m/m) which require rather more attention, even if the obvious point that there has been absolutely no benefit in terms of Exports from the sharp fall in GBP.
** U.S.A. - December CPI **
- The story on US inflation at the current juncture is very simple, the sharp fall in gasoline prices is set to drag headline inflation all the way down to 1.5% y/y, with December seen at -0.1% m/m and 1.9% y/y, however core inflation is basically seen staying around target (consensus 0.2% m/m 2.2% y/y), and continues to buoyed by OER (rents) and medical/health care related items, though the latter has been a rather more volatile item of late. Apparel prices and Air Fares have been quite frequent wild card items over the past 6 to 9 months, but perhaps most attention needs to be given to Services prices that have been creeping steadily higher to stand at 2.7%, and thus offsetting a gradual deceleration in OER over H2 2018. However in Fed policy terms, inflation is clearly not front and centre in terms of that ultra 'data dependency', with the growth outlook and a tight labour market weighing far more heavily in the equation at the current juncture.