- US new home sales and existing home sales are expected to rebound and revised GDP and consumption data could - if anything - show modest upward revisions.
- The most notable US figures will arrive in the first week of the new year. We expect ISM (due on 3 January) to fall back somewhat, but remain well above 50.
- ECB’s last 12-month operation worth EUR97bn matures on 23 December. Excess liquidity may decline and there is upside risk to short rates.
- Euro area monetary developments will be published on 29 December. We expect that money supply growth remains subdued, but look for improvements in loan flows.
- Bank of England Minutes on Wednesday will most likely show the usual 3-way split (7-1-1) in the Monetary Policy Committee.
- Bank of Japan’s monetary meeting next week is not expected to result in an expansion of quantitative easing.
Global
• In the US next week will start off with revised GDP and consumption data on
Wednesday. We do not expect any major revisions in the data, but if this is the case,
they are likely to be upwards. On the same note, we receive PCE data. In line with the
extraordinarily strong retail sales report for November we expect nominal personal
spending to show a 0.7% m/m increase. With the core PCE deflator remaining low, at
0.1% m/m, this means a 0.3% increase in real personal spending in November.
Additionally we will receive housing data, where both new home sales and existing
home sales are expected to rebound with growth of 2.0% m/m and 4.9% m/m, as last
month’s rise in pending home sales indicated more activity on the horizon. The
housing data continue to be too volatile to indicate whether we are actually seeing a
real underlying improvement in housing activity.
Moreover, we will receive November data for durable goods orders on Thursday. We
expect the figures to surprise on the upside, regaining some of last month’s lost terrain
by growing 3% m/m, indicating that the large drop we saw in October was not the
beginning of a new downward trend. Later Thursday we expect to see a minor fall in
University of Michigan consumer confidence, as particularly this month’s large
increase in gasoline prices is expected to have dampened consumer sentiment.
The most notable US figures will be arriving in the first week of the new year. On 3
January we expect the ISM to fall back somewhat, but remain well above 50.
Furthermore, we will receive the December employment report on 7 January. Here we
expect to see a rebound in the employment figures, indicating that November’s weak
reading was merely a “blip” in data rather than a new trend for the US labour market.
Additionally the FOMC Minutes from this week’s meeting will be released on
Tuesday, 4 January.
• In Euroland there are no important macro data due for release next week. The most
interesting event is thus likely to be the last 12-month operation worth EUR97bn that
matures on 23 December. The ECB provides a 13-day bridge operation, so one should
not take it for granted that liquidity will decline. It could be that the bridge operation
will be used to take some extra liquidity as year turn approaches. Nevertheless, we see
some upside risk to EONIA rates after the recent declines.
Monetary developments will be published on 29 December. We expect that money
supply growth remains subdued, but will look for improvements in monthly loan
flows, which will eventually become one of the triggers for the ECB to begin hiking
rates.
In early January final PMIs are expected to paint a picture of increasing divergence in
the euro area as strong growth in Germany and France fails to spill over to e.g. Spain.
The flash inflation for December is projected to show that inflation slows to 1.8%
from 1.9% in November. The unemployment rate is likely to be unchanged at 10.1%
for another month as employment creation has slowed recently. Retail data for
November are projected to show a small decline following the decent increase in
October.
• In the UK the Bank of England Minutes on Wednesday will most likely show the
usual 3-way split (7-1-1) in the Monetary Policy Committee. Most agree that
monetary policy needs to be kept accommodative as the economy remains weak but
some members are clearly uncomfortable that current inflation is as high as 3.3% and
fear that inflation expectations will rise and stay elevated. The tone towards price
developments will therefore most likely be sharpened over the coming weeks without
this affecting rates much. The final GDP numbers for Q3, published at the same time
as the Minutes, will probably confirm the healthy expansion of 0.8% that took many –
including us – by surprise earlier this year. Nationwide’s house price index for
December will probably fall further, confirming that the housing market is heading
for a slump next year. Also keep an eye on PMI manufacturing on 4 January – at 58 it
can almost only fall from here taking into account the state of the economy.
• In Japan we do not expect Bank of Japan (BoJ) to expand its quantitative easing
programme further in connection with next week’s monetary meeting. First, the
appreciation pressure on JPY has eased recently and secondly, although GDP is
expected to contract slightly in Q4 10, we feel increasingly confident that Japan will
resume growing in Q1 next year. We expect the November data to be released in the
coming weeks to be strong. We expect Japan’s exports to surge 5.5% m/m in
November. This is the first increase in Japan’s export since April and in line with
other recent data suggests that the global growth is improving again. Industrial
production is expected to increase 1.3% m/m, the first increase since May. In that
connection we will pay particular attention to production plans for December and
January, as they will give a idea about the strength of the recovery. Japan’s
manufacturing PMI in December is expected to improve to 49.6 from 47.3. Finally,
we expect CPI excl. fresh food to remain unchanged at -0.6% m/m in November.
• In China the main focus in the coming weeks will be on the release of China’s two
manufacturing PMIs early in the new year. We expect GDP growth to accelerate
above 10% q/q AR in Q1 11 and hence we expect China’s manufacturing PMIs to
improve further in the coming months. NBS manufacturing PMI is expected to
improve to 56.0 from 55.2 and HSBC manufacturing PMI should increase to 56.1
from 55.3.
Scandi
• The coming week is a case of the storm before the calm in Denmark, as Statistics
Denmark will not be publishing any data from 23 December to 6 January. Before
then, we have time for consumer confidence, which will fall as it always does in
December. If it drops by more than a couple of points though, it will create
uncertainty about the relatively positive signals so far from Christmas trading. It is
also worth keeping an eye on consumers’ unemployment expectations, which have
grown markedly more pessimistic in recent months. On Monday the Danish Mortgage
Banks’ Federation will publish a new version of its house price statistics for Q3. In
principle, we have already had figures for the quarter, but the new method relates
more precisely to the period in question than the statistics published in the past. We
will also see revised GDP data for Q3 on Wednesday.
• The Swedish data agenda offers two data sets next week; the final NIER business and
consumer confidence surveys this year and November PPI-data and we think the
former is the most interesting. To make a long story short, basically all confidence
indicators, for businesses and consumers alike, are at or close to historical peaks and
that’s an important reason why forecasters in general are upbeat about the outlook for
Sweden. This is best illustrated by the combined economic tendency indicator (a
summary of the sub-indices) which is above one standard deviation from its means
which is regarded as “much stronger than normal economic conditions”. In fact, even
some dampening (for instance consumers might be affected by sharply higher energy
prices during winter) of the data would not alter the general impression of Sweden’s
performance much.
• It will be a quiet week data-wise in Norway. On Wednesday, Statistics Norway will
publish October unemployment figures from the Labour Force Survey.
Unemployment has remained fairly stable, hovering around 3.5% since December
2009. We believe unemployment stays at 3.5% in October. Unemployment figures
from the Norwegian Labour and Welfare Administration (NAV) show that the labour
market may have weakened slightly in recent months up to November, with a slight
rise in gross unemployment, but leading indicators – such as Norges Bank’s Regional
Network –point to growing demand for labour.
http://www.danskebank.com/
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