Macroeconomics: The Day Ahead for 1 March

Once again a busy schedule of statistics is little more
than roadkill in the face of the Ukraine Russia war, but for what it’s worth:
the run of Manufacturing PMIs dominates, with South Korea Trade and Australia’s
Current Account to digest ahead of Italian and German CPI, UK Consumer Credit
and Mortgage Lending, Canada Q4 GDP, US Auto Sales and Construction Spending.
Unsurprisingly Australia’s RBA held rates overnight, and there will be more
central bank speakers today, as G7 Finance Ministers and Central Bankers meet,
and OPEC+ holds its Joint Technical Committee meeting. Developments overnight
in the Ukraine tragically point to an ever greater bombardment and assault by
Russian forces, meeting with fierce Ukrainian resistance, but dashing any hope
that yesterday’s talks might lead to any positive developments. The semblance
of calm after the initial storm in markets yesterday is both testimony to
long-term excess central bank liquidity and above all acute uncertainty, and
further volatility is in effect just one headline away.

In terms of the moot run of data overnight, better than
expected China PMIs suggest the economy is starting to feel a modest boost from
easier credit conditions, with the pick-up in the Construction PMI to 57.6 from
55.4 perhaps the most notable aspect. Elsewhere in Asia, most of the
Manufacturing PMIs were in expansion territory, though the picture in m/m
changes was very mixed, with Eurozone, UK and US readings seen either improving
or unrevised from flash readings, and pointing to a solid pace of expansion.
But with supply disruptions likely to pick-up, these readings obviously say
little about the outlook. After higher than expected February CPI readings in
France and Spain, the first of the German state CPI readings for NRW has come
in well above forecasts at 1.0% m/m , which given that NRW is the most populous
state effectively ensures that national HICP will turn out above the expected 0.8%
m/m 5.4% (vs. January 5.1%), and continuing to put pressure on the ECB in
policy terms, even if geopolitics clearly leans very heavily against that
pressure. The other items of note will be Canada’s Q4/Dec GDP and US February
Auto Sales, with the SAAR rate seen falling to 14.4 Mln following January’s
surge to 15.0 Mln, with low inventories continuing to be a major headwind,
which improving production will still take considerable time to replenish.
Canada’ Q4 GDP is seen at 6.5% q/q SAAR, largely matching the US, and the
anticipated flat m/m reading for December GDP a reflection of Omicron
disruption, and a mean reversion after robust reading of 0.8% and 0.6% m/m in
October and November, but whatever the outcome will not be a factor in
tomorrow’s BOC rate decision, with a 25 bps hike to 0.50% still expected.