Macroeconomics: The Day Ahead for 21 March

The week ends on a subdued note in terms of data and events, with little more than the overnight UK GfK Consumer Confidence and PSNB, and Japan’s National CPI to digest, with provisional Eurozone Consumer Confidence, UK CBI Industrial Trends and Canada’s Retail Sales ahead. The events schedule is equally sparse, with speeches by ECB’s Escriva and NY Fed’s Williams accompanying rate decisions in Russia, Chile and Paraguay. For all that risk assets have found a somewhat firmer footing over the week, this looks to be more of an eerie calm, eye of the storm type hiatus, as the April 2 US ‘reciprocal tariffs’ loom in the headlights, with today’s ‘triple witching’ equity option expiry likely to have had a temporary calming effect. Next week puts the focus on the end of a roller coaster quarter, with the biggest question for Q2 perhaps being whether US consumers are willing to line up behind Trump’s ‘no pain, no gain’ mantra. Some may call it strategy, but that would be flattering what has been nothing less than chaotic and discombobulated implementation, plagued by intransigent ideological nonsense, and a self-righteous belligerence and intolerance, which finds its echo in other genocidal regimes, such as Nazi Germany or Stalin’s Soviet Union, or latterly Iran, North Korea and Venezuela, as well as the absolutism that underpins fanatical Jihadist type movements such as Al Qaeda, ISIS or the Taliban. But it has at least provided some much needed shock therapy for the complacency that has been on display in Europe and Canada for many a decade, which has galvanized governments into taking long overdue action, whether this is sustained and/or results in productive outcomes remains to be seen.

Be that as it may, next week brings the usual run of end of month surveys: G7 flash PMIs, Germany’s Ifo and US Consumer Confidence, as well as some major data in the US (Personal Income/PCE and Durable Goods Orders) and the UK (CPI, Retail Sales and Trade), Japan’s Tokyo CPI, French and Spanish prov. HICP, German Unemployment and Canada monthly GDP. The UK has its Spring Budget and the accompanying OBR update, there are numerous central bank speakers, while the US and Russia will hold talks about the war in Ukraine, hosted by Saudi Arabia, and there will be anticipation about further details on China’s plan to simulate its domestic economy, and the new German grand coalition govt is set to take office.

** U.K. – Mar GfK Consumer Confidence, post MPC thoughts **

– A further uptick in GfK Consumer Confidence, paced by a pick-up in the economic outlook, and also notable for a relatively sharp drop in Savings Intentions (25 vs. 30) will likely serve to reinforce the MPC’s ‘wait and see’ stance. The surprise in yesterday’s MPC decision was the hawkish tilt of the 8-1 vote, with only Dingra dissenting for a 25 bps rate cut, while erstwhile doves Mann, Ramsden and Taylor ostensibly shifted back to the centre. Notably the minutes stuck with the ‘gradual and careful’ guidance on further easing, while also underlining that there was ‘no presumption that monetary was on a pre-set path over the next few meetings’. Adopting a ‘wait and see’ approach in light of the risks that businesses may pass on the increases in wage costs (Employer NI and minimum wage increase) and / or cut employment, as well as the myriad of other uncertainties, is very understandable.