- SUN: US moves onto daylight saving time.
- MON: South Korean Imports/Exports (Feb).
- TUE: OPEC MOMR, UK Jobs Report (Jan/Feb), US CPI (Feb).
- WED: IEA OMR, Chinese Retail Sales (Feb) & Industrial Production (Feb), EZ Industrial Production (Jan), US PPI (Feb) & Retail Sales (Feb), New Zealand GDP (Q4), Japanese Trade Balance (Feb); UK Budget.
- THU: ECB Policy Announcement, Bank of Indonesia Policy Announcement, Australian Jobs Report (Feb), US Philly Fed (Mar).
- FRI: Quad Witching, CBR Policy Announcement, EZ Final CPI (Feb), Canadian PPI (Feb), US University of Michigan Prelim. (Mar).
NOTE: Previews are listed in day-order
UK Jobs Report (Mon):
Expectations are for the unemployment rate in the
3-months to January to rise to 3.8% from 3.7%, the employment change to cool to
40k from 74k and average weekly earnings (ex-bonus) 3M/3M to ease to 6.6% from
6.7%. The prior report was characterised by strong wage growth, whilst the
unemployment rate remained in close proximity to record lows, thus heightening
calls for the BoE to deliver another rate hike at the March meeting. This time
around, analysts at Investec are looking for indications that the labour market
could be beginning to weaken “as higher interest rates add to business costs
and begin to hold back hiring momentum”. Investec adds that such a development
could be augmented by labour force participation creeping up a little, even if
NHS pressures prevent some of the long-term sick from re-entering the search
for jobs. On the wages front, Investec expects a small downtick, citing
reporting from the Recruitment and Employment Confederation that starting
salaries for permanent staff grew at their slowest pace in 21 months in
January. From a policy perspective, a 25bps hike for March is priced at an 84%
probability, and therefore there is some scope for a strong report to further
cement expectations for such a move by the MPC. That said, any signs of
weakness could see the odds drop closer to 50-50 given that Tenreyro and
Dhingra are set to vote for an unchanged rate once again, whilst Governor
Bailey has recently cautioned against assuming that the BoE will inevitably
need to do more on rates.
US Consumer Inflation Expectations (Mon, Fri):
There are two measures out in the week which will
give traders a handle of how consumer inflation expectations have been
developing ahead of the March 22nd FOMC, where sticky inflation and hot
economic data is likely to see the Fed returning to upsized rate hike
increments, and lift its Federal Funds rate target by 50bps. Ahead of the key
CPI report on Tuesday, Monday will see the release of the New York Fed’s
February survey of consumer expectations; the January report showed 1yr median
inflation expectations unchanged at 5.0%, while the 3yr outlook fell by 0.3ppts
to 2.7%, and the 5yr measure rose 0.1ppts to 2.5%. The report also added that
median expected growth in household income fell 1.3ppts to 3.3%, the largest
one-month fall in the series’ history, though it still remains well above its
pre-pandemic levels. On Friday, the University of Michigan’s prelim consumer
sentiment headline for March is expected to be little changed at 67.0, but
traders will be carefully watching the inflation expectations readings; the
one-year inflation outlook rose to 4.1% in February from 3.9% in January, while
the longer-term measure was unchanged at 2.9%.
US CPI (Tue):
Headline consumer prices are expected to rise
+0.4% M/M in February, cooling slightly vs the +0.5% M/M in January; the annual
rate of headline inflation is seen easing to 6.0% Y/Y from 6.4%. Within the
report, analysts think goods inflation will be around flat, vehicle prices
should continue to cool, and apparel prices could even be negative. Core CPI is
also expected to rise +0.4% M/M in February, matching the January pace, though
the annual measure is likely to fall 0.1ppts to 5.5% Y/Y. Shelter price rises
will likely be a key source of core inflation. Analysts will be watching how
components of inflation in the services sector perform; Fed Chair Powell has
previously acknowledged the progress in taming goods inflation, but this week
said there was little sign of disinflation in core services ex-housing, which
accounts for more than half of core consumer expenditures. Accordingly,
analysts at Moody’s say that “while inflation is set to continue moderating, it
may not be enough improvement to keep the Fed from returning to a 50-basis
point rate hike.”
China Retail Sales, Industrial Production (Wed):
Chinese Retail Sales are forecast to have expanded
by 3.4% in February following December’s 1.8% contraction, whilst Industrial
Production is expected to tick higher to 2.6% from 1.3%. Two months’ worth of
data will be released (January & February) as last month’s release was
binned, likely on account of the Chinese New Year. Analysts at ING suggest
Retail Sales could be optimistic as they forecast a 5.0% Y/Y rise, but
Industrial Production could disappoint amid declines in export-related
manufacturing due to weak external demand. That being said, the recent trade
data showed exports contracting less than expected. “Overall, we believe this
set of data should point to a stable recovery of the economy. Given the data,
it is likely that the People’s Bank of China will keep the 1Y medium-term
lending facility (MLF) interest rate unchanged at 2.75%, and there should be no
net injection of liquidity from MLF”, ING says.
New Zealand GDP (Wed):
Q4 Q/Q GDP is expected to print a contraction of
0.2% (prev. +2.0%), with the Y/Y forecast at 3.3% (prev. 6.4%). Desks suggest
drivers for New Zealand growth are becoming “patchier”. Westpac says “Retail,
wholesale, manufacturing and construction all saw declines in the December
quarter, while both personal services (including tourism) and business services
look to have strengthened… Like us, market forecasts appear to be converging on
a negative number. This would be markedly softer than the 0.7% growth that the
Reserve Bank expected in its February policy statement.” Nonetheless, the
RBNZ’s focus remains on inflation, with the Q4 CPI metrics topping
expectations, whilst the Y/Y also matched the prior. “High ‘core’ inflation,
inflation expectations, and temporary price pressures associated with the
recent storms suggest that headline inflation will stay high in the near term,
and is likely to begin to decline significantly only from the second half of
2023”, the RBNZ said in its most recent monetary policy statement.
UK Budget (Wed):
The upcoming UK budget will see Chancellor Hunt
follow-up his Autumn statement with some adjustments to previously outlined
plans, but refrain from wholesale changes. Hunt has been presented some leeway
by a better-than-expected start to the year for the UK’s finances, which
Pantheon Macroeconomics suggests should see the OBR reduce its forecast for
public borrowing in 22/23 to around GBP 140bln from GBP 177bln. For 23/24, a
more favourable energy price outturn and an upgrade to the 2023 OBR growth
projection, to -0.3% from -1.4% should lower public borrowing by around GBP
16bln. Accordingly, Credit Suisse expects Hunt to unveil the following three
giveaways: 1) cancel the planned rise in the Energy Price Guarantee from £2.5K
to £3K in April, 2) announce some public-sector pay rises in the light of
strike action and 3) cancel the projected rise in fuel duty. Elsewhere,
reporting via Bloomberg suggests that Hunt is considering providing British
firms with additional tax relief on investment spending in an attempt to boost
economic growth. Furthermore, defence spending will likely receive a boost in
the region of around GBP 10bln over the next two years. Capital Economics also
highlights the possibility of various measures to boost labour market
participation. Beyond these measures, expectations are that Hunt will take a
cautious approach given the fallout from the Truss mini-budget which saw
markets punish the Gilt market for a policy approach that was deemed as
irresponsible and lacking in credibility. Reason for caution also stems from
the likelihood of the OBR downgrading its medium-term growth forecasts, and
therefore CS expects the fiscal consolidation announced in the Autumn Statement
beyond FY 2024 to remain more-or-less in place. As such, Hunt is expected to resist
outside calls to cancel the scheduled corporation tax increase from 19 to 25%.
From a political standpoint, Hunt will likely wish to keep back any more
substantial giveaways until the next general election in 2024 or Jan 2025. MS
estimates a gross financing requirement of GBP 265bln for FY 23/24, leading to
GBP 242.5bln of gilt issuance, whilst Citi pencils in a figure of around GBP
246bln. Overall, Capital Economics does not look for a meaningful market
reaction given that touted policies have “been well trailed in the media and
should mostly already be priced into financial markets”.
US PPI (WED):
The consensus looks for February producer prices
to rise at a rate of +0.3% M/M (prev. +0.7%); the annual measure
is expected to pare back to 5.4% Y/Y from 6.0%
previously.
US Retail Sales (Wed):
Retail sales are seen rising +0.2% M/M in
February, a significant cooling vs the +3.0% M/M seen in January. Analysts have
noted that warm weather conditions were supporting economic conditions in
January, but that support is not likely to be repeated in the February data.
Credit Suisse expects the Control Group measure to be around flat in the month.
“Consumer finances are in good shape, but data to start the year likely
overstate the strength,” the bank writes, “income growth was robust in January,
but this was driven partly by temporary factors.”
Australia Jobs Report (Thu):
February is expected to have added 48.5k jobs (vs
-11.5k in January), whilst the Unemployment Rate is seen ticking lower to 3.6%
from 3.7% and the Participation Rate ticking up to 66.6% from 66.5%. Desks
highlight that the January metrics marked the second straight decline in jobs
growth, but “the positive is that the January survey reported a
larger-than-usual number of people indicating that they have a job to go to in
the future. This, coupled with the recent run of soft prints, suggests that
employment growth should bounce in the February survey.”, Westpac suggests.
That said, the desk caveats that forecasting could be affected by the uncertainty
surrounding holiday and illness dynamics, as they pencil in a 50k rise in
employment. “If, alternatively, the jump in employment is much larger than our
50k forecast, a sharp move lower in the unemployment rate will not necessarily
occur. This is because a significant proportion of those not employed in
January but with a job to go to may have been out of the labour force. So, upon
return, they will not only boost employment but also participation.”, the desk
says.
ECB Policy Announcement (Thu):
Given the comms at the February meeting and the
subsequent lack of a walk-back from officials at the Bank, the ECB is
unanimously expected to hike the deposit rate by 50bps to 3.0%. As such,
greater focus will be on what lies beyond the March meeting for the ECB, with
the Bank likely to stress its “meeting-by-meeting” and “data-dependent”
approach. In the wake of the February meeting, Reuters sources suggested that
policymakers saw at least two more rate hikes with the May increase expected to
either be 25bps or 50bps. Since then, Eurozone inflation slowed to 8.5% in
February from 8.6%, whilst the super-core metric rose to 5.6% from 5.3%;
something which is of great concern to policymakers on the Governing Council.
This, allied with increasingly hawkish bets surrounding the Fed, has prompted
many desks to project the ECB’s terminal rate at 4% (would see 50bps March,
50bps May and then either another 50bps in June or 25bps in June and July). The
statement is unlikely to be explicit in stating what markets should expect for
the coming months, and as such the accompanying macro projections will be of
greater interest to the market. On which, ING suggests that lower energy
prices, higher 3M Euribor rates and a stronger EUR should lead to lower
inflation projections for 2024 and 2025. ING cautions that if this does not
materialise, it will underscore the level of concern over core inflation on the
Governing Council. This could prompt a further hawkish repricing in the market
and give further ammo to the hawks on the Governing Council with Austria’s
Holzmann (March 6th) outlining the case for 50bps hikes at the next four
meetings. From a dovish perspective, a more subdued growth outlook within the
projections, could see markets move closer to a 3.5% terminal rate. On the
balance sheet, no changes are expected with the current monthly decline of EUR
15bln/month in APP reinvestments set to run until June.
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