Written Commentary
Digesting UK GfK Consumer Confidence, Japan PMIs and national CPI, German GDP details; awaiting German Ifo survey and US PMIs and smattering of ECB speakers; trading volumes to remain subdued.
UK: GfK survey rebound offers some hope for holiday season spending, but overall mood still very subdued; Pill comments suggest monetary policy on hold for protracted period, handcuffed by hapless govt policy.
Germany: Ifo expected to edge higher, but still signal economy in mild recession.
US PMIs seen little changed and running at stall speed, outlook indicators perhaps key.
EVENTS PREVIEW
Given a shortened post-Thanksgiving US trading session, volumes will again be light. There are a few statistical items of note: US and Japan PMIs, German Ifo and Q3 GDP breakdown, UK GfK Consumer Confidence and Canada Retail Sales, with some ECB speakers as the highlights of a limited events schedule. Next week brings month end, with the US PCE/Personal Income, Consumer Confidence and Fed Beige Book, Eurozone CPI, China NBS PMIs, UK credit aggregates, Indian Q3 GDP, Canadian monthly GDP and labour data, Australian and Brazilian inflation, and Japan’s Industrial Production and Retail Sales the highlights of a busy statistical schedule. It will also see the delayed OPEC+ meeting, plenty of Fed, ECB, BoE and BoJ speakers, as well as rate decision in New Zealand and South Korea. The COP28 United Nations Climate Change Conference gets underway on Thursday.
In terms of the overnight, the rebound in UK Consumer Confidence offers some hope that the holiday shopping will not be too heavily blighted by cost of living pressures, but also suggests that the sharp fall in October was more of an anomaly. It remains to be seen how consumers will judge the cut in National Insurance from January against the rise in Ofgem’s household energy price cap. BoE’s Pill’s comments overnight merely underscore that the BoE is basically ‘hoping’ that rates are sufficiently restrictive to bring inflation down gradually, and not so high that they trigger a sharper than expected downturn. As with Hunt’s tinkerman budget statement, there is a strong sense of impotence in the face of the UK’s economic challenges, with monetary policymakers largely hostage to hapless govt policy making.
The details on German GDP highlight just how weak Private Consumption (weaker than expected -0.3% q/q), though offer some hope that CapEx is holding up quite well at 0.6% q/q. The immediate threat of a hit from the govt spending freeze likely to be mitigated by the decision to suspend the ‘Schuldenbremse’ (debt brake) for a fourth year, but still a case of it could have been worse, rather than offering hope of a turnaround for the beleaguered economy, particularly as a heated debate within the fractious governing coalition about reform of the ‘debt brake’ will only deepen already large divisions over policy direction. Japan’s PMIs were effectively as expected with Manufacturing deteriorating further, while Services held steady, which implies that the expected further small contraction in Q4 GDP remains valid.
Germany’s Ifo survey is expected to echo yesterday’s PMIs by posting small improvements, but continuing to signal a well-entrenched contraction, and it will be interesting to see if there is any reaction to the German budget freeze due to the constitutional court ruling. US flash PMIs are seen little changed at ‘flatlining’ levels of 49.9 for Manufacturing and 50.3 for Services.
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