Written Commentary
- Light day for statistics, busy day for central bank speakers and corporate earnings; German Industrial Production, NZ labour data to digest; US and Canada Trade, US Consumer Credit ahead; Fed and ECB speakers, BoC minutes, UK 3-yr, German 6-yr and US 10-yr
- Germany Industrial Production: eighth consecutive month of unchanged or falling output a timely reminder to treat Dec orders surge with caution
- USA: rising auto delinquencies and NY Community Bank rating cut, allied with poor returns on rapid growth in debt cast long shadow over apparent US economic resilience
EVENTS PREVIEW
The day’s data schedule is modest and unlikely to have anything more than a brief passing impact, comprising as it does the overnight German Industrial Production, French Q4 Payrolls, Japan Current Account and NZ Unemployment, with only US and Canada Trade, and US Consumer Credit ahead. Central bank speakers (above all Fed & ECB) are again plentiful, while the Bank of Canada publishes the Summary of Deliberations (minutes) of its January policy meeting, in the wake of BoC governor Macklem yesterday echoing Powell with a pushback on rate cut hopes. Corporate earnings are plentiful in the US and internationally, with highlights likely to include: Alibaba, Carlsberg, Equinor, Paypal, Siemens Energy, Softbank, Uber, Walt Disney and Yum! Brands. Govt bond supply takes the form of UK 3-yr, German 6-yr and a record $42 Bln US 10-yr. The very unsurprising cut in NY Community Bank’s rating to junk by Moody’s, and the rise in US loan delinquencies (as reported by the NY Fed yesterday), above all in the auto sector, is a timely reminder that the lagged effects of rate hikes will bear down on the US and other economies this year, even if rates are cut later this year. The fact that the US economy’s ostensible resilience is also being borne on the wings of even faster debt growth should also be kept in mind at all times. This is not a call to arms for austerity, but rather to highlight that the returns in growth terms on this ballooning pile of debt have been poor.
** Germany – Dec Industrial Production **
– The larger than expected 1.6% m/m fall marks the eighth consecutive month in which Industrial Production has not posted a rise, and while some may argue that Production lags Orders (after yesterday’s reported rebound), it is clear that Germany Industry finds itself in a deep trench, with little to suggest that it will climb out of it meaningfully anytime soon. In the detail, only Capital Goods (1.3% m/m) and Energy (4.1%) posted gains, with Intermediate Goods (-5.2%), Consumer Goods (-0.9%), Manufacturing & Mining (-1.5%) and Construction (-3.4%) all declining. At an industry level, the 4.1% m/m rise in Autos, was more than offset by the ongoing rout in the Chemicals sector (-7.6%). Ongoing strikes in the rail and air travel sectors also add to the impression that there is little prospect for a rebound in Q1 GDP.
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