Dentalfloss
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- Manufacturing PMIs dominate data schedule, Japan and Oz CapEx to be digested
ahead of UK Credit, US Personal Income & PCE, Claims, Construction
Spending and Auto Sales; second round of Powell testimony; Spain, France
and UK bond auctions
- Manufacturing PMIs: China Caixin pick-up leans against overly negative
interpretation of yesterday's PMIs; Europe PMIs robust, UK expected to
dip modestly; US ISM seen slightly lower but still indicative of very
robust pace of activity
- US Personal Income / PCE: PCE expected to slow, focus on Services spending,
deflators forecast to be unchanged
- Will Powell testimony push back on market move to discount four rate hikes
or not?
..........................................................................
********************
** EVENTS PREVIEW **
********************
A new month beckons and as ever Manufacturing PMIs dominate the statistical schedule, with UK Credit data and US Personal Income/PCE, Weekly jobless claims and Auto Sales also on tap. There are the Australian and Japanese Q4 CapEx data to digest, the former missing forecasts at -0.2% vs. expected +1.0%, though this was mitigated by a revision to Q3 to 1.9% q/q from 1.0%, and an upgrade to corporate expectations on CapEx for 2017/2018, as such not as weak as the headline suggests. By contrast Japan's Q4 CapEx was much better than expected at 4.3% q/q, with an even stronger core (ex-Software) reading of 4.7%, which accompanied a solid manufacturing PMI, revised fractionally higher to 54.1. Sadly markets appear to be in a great rush to talk the global economy down, after slightly disappointing readings from India and the official China NBS Manufacturing PMI yesterday, though today's Caixin Manufacturing PMI turned out marginally stronger than expected at 51.6 vs. a forecast of 51.3, and given the distortions due to the Lunar New Year holiday also very evident in the Korean Trade (above all export) data, it does appear to be very premature to suggest that this signals the global economy is past its peak. Continental European PMIs have been very robust, most notably Spain (56.0 vs. forecast 54.8) and Sweden (59.9 vs. forecast 58.0), though Italy at 56.8 from 59.0 missed forecasts, but in overall terms still imply a robust level of activity.
The UK Manufacturing PMI is seen dipping to 55.0 from January's 55.3, and this would be the weakest reading since June 2017, but as with Italy still indicative of solid underlying momentum. Of rather more importance will be the credit data, with a modest dip to £1.4 Bln expected, which would see the y/y rate resume its downtrend, in so far as there is a £1.7 Bln reading from January 2017 falling out of the comparison. However this would still leave the y/y rate around 9.0%, way above anything that could be considered to be sustainable given that wage growth remains subdued.
For the US, Powell's second round of testimony to the Senate Banking Committee will probably garner more attention than the day's statistics. Be that as it may, Personal Income is seen up 0.3%, while PCE is expected to dip to 0.2% m/m, with the risk of a downward revision to December (due to the Retail Sales) mitigated by yesterday's upward revision to Q4 Personal Consumption on the back of Services. The FOMC and Powell's very sanguine assessment of the factors that have restrained the PCE Deflators over the past year renders today's readings somewhat moot, with headline and core seen unchanged at 1.7% and 1.5% y/y respectively. Construction Spending is seen slowing to 0.3% from 0.7% in December, in no small part due to adverse weather effects at the start of the month. As for the Manufacturing ISM, this is expected to dip marginally to 58.7 from January's 59.1, but still very close to the 7-yr high opf 60.2 posted in September, with particular interest in the Orders reading, which, despite January's dip to 65.4, remains at levels not seen since 2004. Auto Sales are expected to pick up to a 17.2 Mln SAAR pace after weaker than expected 17.07 mln in January, which if forecasts are correct implies a drop of around 2.0% y/y, with discounts and incentives expected to have dipped very modestly. Markets moved to discount a higher chance of four rate hikes in 2018 following Powell's generally very well received testimony on Tuesday, and the focus for today will be on whether or not he uses today's testimony to push back on that 'hawkish' market interpretation.
from Marc Ostwald
ahead of UK Credit, US Personal Income & PCE, Claims, Construction
Spending and Auto Sales; second round of Powell testimony; Spain, France
and UK bond auctions
- Manufacturing PMIs: China Caixin pick-up leans against overly negative
interpretation of yesterday's PMIs; Europe PMIs robust, UK expected to
dip modestly; US ISM seen slightly lower but still indicative of very
robust pace of activity
- US Personal Income / PCE: PCE expected to slow, focus on Services spending,
deflators forecast to be unchanged
- Will Powell testimony push back on market move to discount four rate hikes
or not?
..........................................................................
********************
** EVENTS PREVIEW **
********************
A new month beckons and as ever Manufacturing PMIs dominate the statistical schedule, with UK Credit data and US Personal Income/PCE, Weekly jobless claims and Auto Sales also on tap. There are the Australian and Japanese Q4 CapEx data to digest, the former missing forecasts at -0.2% vs. expected +1.0%, though this was mitigated by a revision to Q3 to 1.9% q/q from 1.0%, and an upgrade to corporate expectations on CapEx for 2017/2018, as such not as weak as the headline suggests. By contrast Japan's Q4 CapEx was much better than expected at 4.3% q/q, with an even stronger core (ex-Software) reading of 4.7%, which accompanied a solid manufacturing PMI, revised fractionally higher to 54.1. Sadly markets appear to be in a great rush to talk the global economy down, after slightly disappointing readings from India and the official China NBS Manufacturing PMI yesterday, though today's Caixin Manufacturing PMI turned out marginally stronger than expected at 51.6 vs. a forecast of 51.3, and given the distortions due to the Lunar New Year holiday also very evident in the Korean Trade (above all export) data, it does appear to be very premature to suggest that this signals the global economy is past its peak. Continental European PMIs have been very robust, most notably Spain (56.0 vs. forecast 54.8) and Sweden (59.9 vs. forecast 58.0), though Italy at 56.8 from 59.0 missed forecasts, but in overall terms still imply a robust level of activity.
The UK Manufacturing PMI is seen dipping to 55.0 from January's 55.3, and this would be the weakest reading since June 2017, but as with Italy still indicative of solid underlying momentum. Of rather more importance will be the credit data, with a modest dip to £1.4 Bln expected, which would see the y/y rate resume its downtrend, in so far as there is a £1.7 Bln reading from January 2017 falling out of the comparison. However this would still leave the y/y rate around 9.0%, way above anything that could be considered to be sustainable given that wage growth remains subdued.
For the US, Powell's second round of testimony to the Senate Banking Committee will probably garner more attention than the day's statistics. Be that as it may, Personal Income is seen up 0.3%, while PCE is expected to dip to 0.2% m/m, with the risk of a downward revision to December (due to the Retail Sales) mitigated by yesterday's upward revision to Q4 Personal Consumption on the back of Services. The FOMC and Powell's very sanguine assessment of the factors that have restrained the PCE Deflators over the past year renders today's readings somewhat moot, with headline and core seen unchanged at 1.7% and 1.5% y/y respectively. Construction Spending is seen slowing to 0.3% from 0.7% in December, in no small part due to adverse weather effects at the start of the month. As for the Manufacturing ISM, this is expected to dip marginally to 58.7 from January's 59.1, but still very close to the 7-yr high opf 60.2 posted in September, with particular interest in the Orders reading, which, despite January's dip to 65.4, remains at levels not seen since 2004. Auto Sales are expected to pick up to a 17.2 Mln SAAR pace after weaker than expected 17.07 mln in January, which if forecasts are correct implies a drop of around 2.0% y/y, with discounts and incentives expected to have dipped very modestly. Markets moved to discount a higher chance of four rate hikes in 2018 following Powell's generally very well received testimony on Tuesday, and the focus for today will be on whether or not he uses today's testimony to push back on that 'hawkish' market interpretation.
from Marc Ostwald
