- US data dominates statistical schedule, UK Construction PMI and German
labour data also due; FOMC minutes and Congress reconvening also in
focus
- US ISM Manufacturing: strong regional surveys impart upside risks
- US Auto Sales: marginal pick-up seen vs November, but 2017 sales
still set to post first fall in 8 years, though pace still strong
- FOMC minutes: focus on inflation, labour market and tax reform bill
discussion
from Marc Ostwald
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** EVENTS PREVIEW **
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As is often the case on the second working day of the month, today's schedule is relatively modest in statistical terms, though not without highlights via way of US Construction Spending, Manufacturing ISM and Auto Sales, with German Unemployment and the UK Construction PMI providing further food for thought ahead of those items. On the events side of the equation MIFID II comes into force today, while in the US the December FOMC minutes are published, and Congress reconvenes as yet another debt ceiling deadline looms in the headlights.
** U.S.A. - Manufacturing ISM, Construction Spending & Auto Sales **
- The consensus looks for no change in the Manufacturing ISM at 58.2, however the fresh 6-yr high (67.6) in the the Chicago PMI, and strength in other regional sector surveys tends to point to a better than expected outturn, underlining that activity in the sector remained strong going into the new year; it may even get close to the 33-yr high seen in September 2017. Construction Spending is seen posting another solid 0.5% m/m gain, however the breakdown will be in focus as commercial spending is seen extending its rebound after a protracted period of weakness, while a drop in residential completions suggests a pause for the post hurricane boost to housing spending. Auto Sales are expected to have edged up modestly from November to a 17.5 Mln SAAR pace, with industry specialists such as Edmonds and JD Power suggesting a better than expected outturn at around 17.7 Mln, paced by year end discounts, but restrained by a drop in fleet sales. This would however confirm that total 2017 auto sales were down on 2016, the first fall since 2009, though at an expected 17.2 Mln for the year, this would still be a highly respectable pace of sales by any historical standards. As for the FOMC minutes, the focal points will be the discussion about the protracted (though modest) undershoot in inflation, which prompted Evans and Kashkari to dissent at the meeting, and on the other side the committee's downward revision to its Unemployment Rate forecasts, and the extent to which the FOMC believes this may finally deliver a more significant pick-up in wages. It will also be interesting to note any discussion on the impact of the tax reform bill, and the potential implication for Fed policy.