Economic week ahead: February 22-26, 2016

February 22, 2016

Main Macro Events This Week

United States:ВВ Housing reports this week feature January existing home sales (Tuesday) and new home sales (Wednesday), along with December Case Shiller (Tuesday) and FHFA (Thursday) home prices. Existing home sales are forecast rising 0.7% to a 5.500 mln pace following the 14.7% bounce in December, though there may be some further fallout from the regulatory distortion from late 2015, as well as some depressing impact from weather and the market turbulence to start 2016. New home sales are expected to drop 4.4% to a 0.520 mln clip following the 10.8% jump in December, which was a 3rd consecutive monthly increase. We look for some slippage in the Case Shiller index, which hasn’t posted a monthly decline since January 2015. On the other hand, the FHFA is expected to post another small increase. It hasn’t declined since January 2012. Durable goods new orders are forecast rebounding 2.0% in January after diving 5.0% in December, continuing a typically saw-toothed pattern, which limits a lot of the report’s usefulness. Q4 GDP is expected to be revised slightly lower to a 0.5% pace, versus the 0.7% increase in the Advance report, and down from 2.0% in Q3. Much of the weakness is a function inventories, but the soft data did factor into recession worries earlier this year. January income and consumption reports will help fine tune GDP forecast for Q1 too. Income is forecast rising 0.4%, with consumption up 0.3%. The gains in income/spending, amid a firmer labor market, are major factors countering recession worries. Consumer confidence and sentiment data is also on tap this week and are expected to show modest gains thanks to the mixed though mostly improved data and diminished recession fears.

Canada:ВВ The Canadian calendar is thin after last week’s busy holiday-shortened docket. The highlight will be comments from BoC Deputy Governor Schembri (Wednesday), who speaks to the Guelph Chamber of Commerce in Guelph, ON. His remarks, titled “Connecting the Dots: Elevated Household Debt and the Risk to Financial Stability” will be published on the BoC’s website at 12:35 ET. There will not be a press conference but he will take questions from the audience. Data includes the December establishment employment survey (Thursday), which provides a separate jobs tally along with an average weekly earnings figure. Neither result is market moving. We expect earnings to dip 0.1% m/m in December after the 0.3% drop in November. The timely labour force survey revealed a 22.8k gain in December before falling 5.7k in January. An increase in the establishment survey’s jobs measure during December is anticipated.

Europe:ВВ The week kicks off with the Manufacturing and Services PMI readings (today) with the former seen falling to 52.0 (median same) from 52.3 and the latter to 51.2 (med 53.3) from 53.6, which would leave the composite at 53.2 (median 53.3) from 53.6. Data broadly in line with expectations would still point to ongoing expansion in both sectors, but the recent slowdown is consistent with a growth outlook weakened by global headwinds. Similarly, the German Ifo Business Climate (Thursday) is expected to fall to 106.9 (median same) from 107.3 and the overall Eurozone ESI Economic Confidence to 104.4 (median same) from 105.0. With the focus on February confidence readings, final Q4 GDP numbers are not expected to change the current outlook unless there are marked revisions. We expect German Q4 GDP to be confirmed at 0.3% q/q, and Spanish GDP at 0.8% q/q, which would not change the overall Eurozone estimate. More important will be the round of preliminary national inflation numbers for February, where we see the Spanish HICP falling to -0.5% y/y (median same), French HICP to fall to 0.2% y/y (median 0.1%) from 0.3% y/y and German HICP (Thursday) to fall to 0.3% y/y (med 0.1%) from a preliminary January reading of 0.4% y/y. Base effects and oil prices are the main reason for the renewed decline, but with expectations for a pickup in headline rates being pushed out further and further, the ECB will be fretting about the long term impact of persistently low headline rates. The February numbers will overshadow the release of the final Eurozone HICP reading, which is expected to be confirmed at 0.4% y/y (median same).ВВ The data calendar also has French consumer spending and German retail sales for January, as well as Eurozone M3 money supply growth, with the latter seen steady at 4.7% y/y. As usual, the focus here will be on the counterparts and lending growth, however. Germany releases GfK consumer confidence data.

United Kingdom:ВВ The UK calendar this week brings the latest CBI surveys on industrial trends (today) and the retail sector (Wednesday), and the second estimate of Q4 GDP. We expect the industrial trends survey for February to rebound a little from January’s unexpected weakness, forecasting a -12 outcome in the headline total orders reading (median same). The CBI’s distributive sales survey, meanwhile, has us expecting a correction to 12 from 16 in the headline realized sales figure. The second release of Q4 GDP should come in unrevised at 0.5% q/q and 1.9% y/y.

China:ВВ Apart from MNI Business Sentiment Indicator (today) and House Price Index on Friday, the Chinese calendar is empty. MNI Business Sentiment declined to 49.9 from the previous figure of 52.3. The decline was rather big and came below the analyst expectations but more importantly the actual number was below 50 index points. This indicates that the number of businesses feeling pessimistic about the future was greater than the number of businesses being positive about future growth.

Japan:ВВ kicked things off with the flash Markit PMI manufacturing index (today). The index fell to 50.2 after falling to 52.3 in January, from 52.6 in December. January services PPI (Wednesday) is forecast slowing to a 0.2% y/y pace, halving the previous 0.4% gains. Revised December leading and coincident indices are also due (Wednesday). January national CPI (Friday) is expected to drop to -0.1% y/y from December’s 0.2% reading on an overall basis, while the core reading is seen down 0.1% y/y from up 0.1% previously. Overall Tokyo February CPI (Friday) is seen ticking up to -0.2% y/y from -0.3%, while the core is expected to dip to -0.2% y/y from -0.1% in January. The downtrend in price pressures will be a thorn in the BoJ’s side, and will be a major factor in the BoJ’s policy decisions. BoJ Governor Kuroda said last week that the Bank will continue to ease until the 2% is achieved. It could be awhile.

Australia:ВВ calendar has the RBA’s Assistant Governor Debelle (Financial Markets) speaking at the KangaNews DCM Summit in Sydney (today). Tony Richards, the RBA’s Head of Payment Policy Department, speaks at the Payment Innovations 2016 Conference in Sydney (Tuesday). Economic data includes the Q4 wage price index (Wednesday), expected to expand 0.5% (q/q, sa) after the 0.6% gain in Q3. Also, Q4 private capital expenditures (Thursday) are seen falling 5.0% (q/q, sa) after the 9.2% drop in Q3 as the resource sector continues to delay projects amid a still bleak price outlook.

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