The year is only a week old

9 January, 2017

Though the December U.S. jobs report was largely plain vanilla, it was good enough to support rising “animal spirits.” The surprise headliner of the report, however, was the 0.4% surge in earnings, which caught the markets’ attention. The question is, was this a one-off gain, or is it a harbinger of a pick-up in wage and price pressures that will push the FOMC into a more aggressive rate hike path? Several Fed voters have already begun to incorporate some Trump stimulus into their projections and are expected to continue to voice that opinion as Republicans are itching to expeditiously move ahead with their pro-business agenda in 2017.

United States: The back-loaded U.S. economic calendar in the wake of the slightly inflationary December employment report could be a little anti-climactic, but there will be a host of potentially relevant fundamental data with retail sales headlining on Friday. Expectations are for 0.7% increase and 0.5% ex- autos. Prior to that anchor release, consumer credit (Monday), Wholesale sales are projected to rise 0.5% in November (Tuesday). The weekly MBA mortgage and EIA energy inventory reports (Wednesday) are on tap next. Import prices are set to increase 0.8% (Thursday) in December given the rebound in oil prices from long-term depressed levels, after their prior 0.3% drop, while export prices are pegged to sink 0.2%. Initial jobless claims should snap back 19k to 254k for the week ended January 7 after their inter-holiday plunge the week prior. With retail sales will come December PPI also due (Friday), Inflation data will be closely monitored after the uptick in earnings/wage growth in December payrolls. Business inventories are forecast to rise 0.7% in November, while preliminary Michigan sentiment may rise to 98.5 in January.

Fedspeak: Fed Chair Yellen returns this week on Thursday.  Already Saturday Minneapolis Fed dove Kashkari took part in a “Too-Big-To-Fail” panel and Governor Powell participated in a panel on “Low Interest Rates and Financial Markets.” Monday has updates from Boston dove Rosengren and Atlanta Fed centrist Lockhart. Thursday also brings Philly Fed’s Harker on the economic outlook, Chicago’s Evans on the economy and policy, and St. Louis Fed hawk-dove Bullard on the economy and policy. Harker speaks again on economic mobility on Friday-the-13th.

Canada: Policy relevant economic data remains front and center on Canada’s calendar in the run-up to the January 18 BoC announcement and Monetary Policy Report. The BoC’s Business Outlook Survey is first out of the gate this week (Monday). The slate of housing figures is heavy, with housing starts (Tuesday), building permits (Tuesday), the new home price index for November (Thursday), December Teranet/National HPI (Thursday) and December existing home sales (Friday) all due.

Europe: The year is only a week old, but the focus has switched as inflation is making a comeback and survey indicators continue to come in higher than expected. The central bank just got its QE extension in on time ahead of the uptick in HICP rates, which of course come mainly on the back of base effects from energy prices. The calendar this week will not really add anything new to the outlook for 2017 and data are mainly backward looking with November production numbers from Germany, France and the Eurozone as a whole, as well as final French December HICP readings. The latter are not expected to bring a major surprise and we expect the headline rate to be confirmed at 0.8% y/y, which is in line with consensus. The most up to date number is the initial estimate of full year 2016 GDP from Germany on Thursday, where we look for an acceleration in the overall growth to 1.9%  from 1.7% in 2015.

UK: Incoming data, particularly last week’s December PMI surveys yesterday, which smashed forecasts, continue to point to a robust economic rebound from the brief dip that was seen in the month or so following the vote to leave the EU last June. Sentiment in sterling markets has been correspondingly upbeat in early-year trading; the FTSE 100 equity index clocked record highs last week and the pound held its ground on foreign exchanges (though remains 17% below pre-EU vote levels).  The calendar this week is highlighted by production figures for November (Wednesday). The BRC retail sales report for December is also up (Tuesday), along with November trades figures (Wednesday) and a smattering of house price data through the week. None of the data is likely to challenge prevailing sentiment.

China: December CPI and PPI (tentatively due Tuesday) are penciled in at 2.1% y/y from 2.3% for the former, and 4.5% y/y from 3.3% for the latter. December new yuan loans (tentatively Tuesday) are expected to slip to CNY 700.0 bon from 794.6 bln. Trade data (due Thursday or Friday) should show modest improvement in the deficit to -$44.0 bln in December.

Japan: Markets will be closed Monday for the “Coming of Age” holiday. The calendar picks up Tuesday with December consumer confidence, which we expect will improve slightly to 41.0 from 40.9. November’s current account surplus (Thursday) is forecast to have narrowed to JPY 1,400.0 bln from JPY 1,719.9 bln previously. December bank loans (Thursday) should be up 2.5% y/y from 2.4% in November.

Australia:  The calendar remains thin this week, Retail sales (Tuesday) are projected to improve 0.5% following the identical 0.5% increase in October. There is nothing from the Reserve Bank of Australia. Projects are for steady rates from the RBA in 2017, as the economy gradually adjusts to the post-resource boom environment. The next RBA meeting is in February.


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