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Macroeconomics: The Day Ahead for 25 May

  • US debt ceiling impasse continues to cast long shadow; digesting German and Singapore final GDP, German Consumer & French Business Confidence, Korea & Indonesia rate holds; awaiting UK CBI Retailing, US revised Q1 GDP, weekly jobless claims & Pending Home Sales; plenty more central bank speakers, Turkey & South Africa rate decisions; Italy 2 yr, US 7 yr
  • Germany ‘officially’ in recession, slide in Private Consumption & Govt Expenditure offsets Private CapEx and Net Export boost; Q2 should improve, but 2023 GDP contraction very possible
  • South Africa rate decision: further 50 bps expected, but lower than expected CPI and some ZAR stability may encourage smaller hike
  • UK CPI: some thoughts via CGTN Europe interview yesterday


Today’s run of data and events may well struggle to get much traction in market terms, given the continued impasse over the US debt ceiling, which is now going to the wire as it did in 2011. There are the as expected no change rate decisions in South Korea and Indonesia, German final Q1 GDP and GfK Consumer Confidence, and the drop in French Business Confidence to digest. Ahead lie another rash of central bank speakers (mostly ECB), rate decisions in Turkey and South Africa, UK CBI Retailing survey, US revised Q1 GDP, weekly jobless claims and Pending Home Sales. Canadian banks (CIBC, RBC and Toronto Dominion), Costco and Meituan feature in terms of corporate earnings, while Italy sells 2-yr and the US 7-yr debt. In terms of today’s rate decisions, Turkey’s TCMB is expected to hold rates at 8.50% again, with the run-off presidential election on Sunday and the persistent downward pressure on the TRY giving the central bank no choice. South Africa’s SARB is expected to hike rates a further 50 bps to 8.25%, though the marginally lower than expected CPI data yesterday, some stability in the ZAR, and despite Eskom’s escalating rolling blackout woes heading into winter, has led some commentators to suggest a smaller hike of 25 bps.

** Germany – Q1 GDP, June Consumer Confidence **

So Germany did not avoid the recession that many had anticipated, even if the breakdown highlights a huge drag from the -4.9% q/q drop in Govt Expenditure, which accounted for much of the drop -0.3% q/q for headline GDP, though an even bigger than forecast -1.2% q/q drop Personal Consumption was also a major contributor. These items were offset by a 3.0% q/q jump in Capital Investment, led above all by a 3.9% q/q rise in Construction (thanks to the mild winter), as well as a boost from Net Exports, as energy imports dropped. While the Bundesbank expects Q2 GDP to be marginally positive, it will be difficult to achieve anything much better than a flat outcome for 2023 after such a poor start. Consumer Confidence did recover a little further, with Income Expectations less negative (-8.2 vs. prior -10.7), but the ‘willingness to buy’ index fell again (-16.1 vs. -13.1) suggesting that Personal Consumption will likely remain very subdued in Q2.

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