Macroeconomics: The Week Ahead: 12-16 February

The new week’s schedule will focus on a busy run of major statistics from the US (CPI, PPI, Retail Sales, Industrial Production, Import Prices, NAHB, NY & Philly Fed Manufacturing surveys) and the UK (CPI, Unemployment, Wages, Q4 GDP, Industrial Production, Construction Output, Trade and Retail Sales), with Japan also looking to Q4 GDP’; Australia to Unemployment; India to CPI, WPI, Industrial Production and Trade, while the EU has the German ZEW survey and CEE Q4 GDP. There will again be plenty more central bank speakers and corporate earnings, as well as monthly Oil Market reports from OPEC and the IEA, the IEA ministerial meeting and USDA data on inventories and acreage outlook for Corn, Cotton, Soybeans and Wheat. China will be closed all week for Lunar New Year, while Carnival will keep much of South America closed at the start of the week, as well as disrupting activity in Germany.

In terms of the US, CPI is set to increase in m/m terms at 0.2% headline and core at 0.3%, i.e. around recent monthly trends, but thanks to benign base effects, that would take headline y/y down to 2.9% from 3.4%, though core only down to 3.7% from 3.9%; PPI is seen up just 0.1% m/m on headline and core. Retail Sales have all too frequently surprised on the upside over the past year, but maybe this time will be different, with the consensus looking for the weak auto sales to drag headline down -0.1% m/m, despite some offset from higher gasoline prices, with ex-Autos & Gas seen up 0.3%, and the core ‘Control group’ up just 0.2%. Industrial Production should get a boost from utilities output due to the cold January weather, and is seen up 0.3% m/m, but Manufacturing Output is expected to be unchanged, though energy exploration & extraction could be a wild card. The farcically volatile NY Fed Manufacturing is forecast to rebound sharply from January’s -43.7 to a more ‘normally’ weak -11.8, with the more reliable Philly Fed equivalent seen edging up to -8.6 from -10.6; lower mortgage rates are expected to give the NAHB Housing Market Index a further modest boost to 46 from 44. The week ends with provisional Michigan Sentiment, that is expected to eke out a further small gain to 80.0 from 79.0, with further support from higher equities and the run of positive economic news.

In the UK, the busy run of major data kicks off with labour data, which are forecast to see a further modest -18K dip in HMRC Payrolls, a slight uptick in Unemployment, but most importantly a further sharp fall in Average Weekly Earnings to 5.6% y/y from 6.5%, with the ex-Bonus metric dropping to 6.0% from 6.6%. That would be welcome news for the BoE in trend terms (and also matching their own forecast), though the pace of wage growth will still be much too high in absolute terms. By contrast, Wednesday’s CPI will make for less comfortable reading, with a headline drop of -0.3% m/m, expected to push the y/y rate up to 4.1% from 4.0%, with core seen at 5.2% y/y from 5.1%, paced above all by a jump in Services to 6.8% y/y from 6.4%, though a further deceleration in Food prices should provide a considerable offset. Thursday brings Q4 GDP and the usual run of monthly activity data, with monthly GDP seen reversing much of November’s +0.3% m/m with a drop of 0.2%, which in turn is expected to see Q4 GDP drop 0.1% q/q, echoing Q3. Industrial Production, Construction Output and the Index of Services are all seen marginally lower (-0.1% to -0.2%), with the Trade deficit seen somewhat wider at £-14.75 Bln. Last but not least, Friday’s Retail Sales are forecast to rebound 1.5% m/m after December’s -3.2% m/m drubbing, with strong online sales offsetting bad weather effects on the High Street (as seen in last week’s BRC sales). On balance, if forecasts are correct, such outcomes are unlikely to put the BoE under sufficient pressure to dial down on its ‘high for longer’ rhetoric.

Elsewhere, Tuesday’s German ZEW survey are expected to see a modest rise in Expectations (17.5 from 15.2), boosted by the rise in the Dax, with a run of further grim economic news weighing on the Current Situation index (-79.0 vs. -77.3). Japan’s provisional Q4 GDP is seen up 0.3% q/q after the sharp -0.7% q/q drop in Q3, though the details will require attention, with domestic demand seen flat, and the rebound mostly due to a 0.3 ppt contribution from Net Exports and a modest 0.2% q/q increase in Business CapEx, while Private Consumption and Inventories are seen flat. India’s CPI is expected to drop back to 5.0% y/y after rising to 5.7% in December, with a reversal in food prices and continued downward pressure on logistics related prices the main contributors. Energy goods and gold and the strength of infrastructure investment are seen pushing the Trade deficit slightly wider to $-20.7 Bln, while the wild ride due to base and holiday timing effects may help Industrial Production rebound rather more than the expected 0.1 ppt to 2.5%. After an unexpectedly sharp 65.1K fall in December, Australia’s Employment is expected to rebound 30K, but the Unemployment Rate is seen edging up to 4.0% from 3.9%, as the Participation rate rises to 66.9% from 66.8%.

Corporate earnings highlights for the week as compiled by Bloomberg News are likely to include: Ahold Delhaize, Airbnb, Airbus, Airports of Thailand, America Movil, American International Group, Applied Materials, Arch Capital, Arista Networks, Barrick Gold, Biogen, Bridgestone, Cadence Design Systems, Capgemini, CBRE Group, Cenovus Energy, Cisco Systems, CME Group, Coal India, Coca-Cola, Coinbase Global, Commonwealth Bank of Australia, Consolidated Edison, CSL, Datadog, Deere, Digital Realty Trust, DoorDash, DSM-Firmenich, Ecolab, Energy Transfer, Eni, Equinix, EssilorLuxottica, Global Payments, Globalfoundries, Goodman Group, Great-West Lifeco, Heineken, HubSpot, Ingersoll Rand, Intact Financial, Iqvia, Japan Post, Japan Post Bank, Japan Tobacco, Kraft Heinz, Legrand, Manulife Financial, Marriott International, Moody’s, Occidental Petroleum, Oil & Natural Gas, Orange, Pernod Ricard, PTT, Relx, Restaurant Brands International, Safran, Schindler, Schneider Electric, Shopify, Sika, SMC, Sony Group, Southern, Stellantis, Swiss Re, TC Energy, Telstra Group, Tokio Marine, Trade Desk, Vulcan Materials, Wal-Mart de Mexico, Waste Connections, Waste Management, Welltower, Wesfarmers, West Pharmaceutical Services, Williams, Zoetis.