- US CPI the focal point as UK labour report, Japan PPI & German WPI are digested; German ZEW survey, India CPI & Industrial Production, US NFIB Small Business Optimism also ahead; EIA Short Term Energy Outlook; UK 5 yr and US 30 yr auctions
- UK: larger than expected fall in Average Earnings offers further backing for MPC hold, downtrend perhaps accelerating; labour market loosening still modest
- Germany: ZEW Expectations seen edging lower, despite strong Dax performance; Current Conditions seen improving, but still very negative
- India: headline CPI seen boosted by food prices, but core set to ease; Industrial Production set to jump, but very volatile base effects
- US CPI: energy and used cars seen weighing on headline, but housing, medical insurance and less retail discounting to boost core; Fed view likely ‘good but no cigar’
EVENTS PREVIEW
US CPI dominates the day’s statistical schedule, but is not the only major item, with UK labour data, Japan’s PPI and Norwegian GDP to while ahead lie Germany’s ZEW survey, Indian CPI and Industrial Production, US NFIB Small Business Optimism, while tonight brings the BoJ’s Q4 Tankan survey. The events schedule sees the end of the UN COP28 Climate conference, France’s Agriculture Ministry report on crop harvest and winter planting, along with the first of this week’s trio of monthly Oil Market Reports via way of the EIA’s Short Term Energy Outlook. Govt bond supply takes the form of the overnight Japan 5-yr, with the UK selling 5-yr, and the US 30-yr. Germany’s ZEW survey is expected to defy a typically close correlation between Expectations and the performance of the Dax index over the month, with a slight slip to 8.0 from 9.8, while Current Conditions are forecast to improve modestly to a still desultory -76.0.
** U.K. – Oct/Nov Employment and Wages **
– The larger than expected fall in both October Average Weekly Earnings measures to headline 7.2% y/y vs. expected 7.6% and a revised prior 8.0%, and ex-Bonus 7.3% y/y vs. expected 7.4% and prior 7.7% will offer some further welcome relief for the BoE, though both measures remain very high. But the trend lower is self-evident, and if the ‘flash’ November HMRC Median Pay estimate of 5.3% y/y is anything to go by, then there will be more good news in coming months. Payrolls were a tad lower than expected at -13K vs. anticipated +5K and prior 39K, while Vacancies also decelerated to 945K, but are still much higher than the pre-pandemic peak around 800K.
** India – November CPI, October Industrial Production **
– India’s CPI has been very volatile this year, but has been declining after a primarily food price related spike to 7.44% y/y in July, but is expected to jump higher from 4.87% to 5.78% y/y, paced by a combination of adverse base effects, and higher prices for some fresh fruit and vegetables due to adverse seasonal weather. The RBI will likely look through this temporary spike, particularly if core CPI were to slip further from October’s 4.3% y/y, as seems likely. Industrial Production is expected to surge higher to 10.4% y/y from September’s 5.8%, with base effects accounting for much of the rise given some rather violent swings in Output in the same period in 2022 (Sep +3.3% y/y, Oct -4.1%, Nov 7.6%). It will however also reflect ongoing strength in Construction Output, as evidenced by double digit growth in Steel and Cement production, and aided by govt subsidies and continued strength in Infrastructure output, suggesting that domestic demand should help to mitigate some of the drag from softening external demand on Q4 GDP.
** U.S.A. – November CPI **
– There have been a lot of downside surprises in monthly inflation data around the world over the past two months, but the risk on today’s US CPI looks to be to the upside. The consensus looks for a flat m/m headline, restrained heavily by a more than 6.0% m/m fall in gasoline prices, along with a fall in used car prices, though new car prices are seen ticking up, but in seasonally adjusted terms these will be a smaller drag than in October. Core CPI is seen edging up to 0.3% m/m, which implies a 0.1 ppt dip in headline y/y to 3.0%, and an unchanged Core at 4.0%, with no moderation in Housing OER from October’s 0.4% m/m stalling any improvement in core CPI, along with continued upward pressure from medical care (insurance), and some risk of less discounting for clothing than is seasonally typical. While a modest upside miss would not materially change the view that inflation is on a clear downward trend, market risk appetite has been so heavily pumped up that its reaction could prove to be a lot sharper than justified, given skewed FOMO driven positioning.
** Japan **
– Last but not least tonight’s BoJ Q4 Tankan survey is anticipated to show little change vs. Q3 for Large Manufacturing and Services, though a notable improvement in the outlook for Non-Manufacturing (25 vs. Q3 21), with CapEx expected to hold at a relatively robust 12.7% y/y (vs. Q3 13.6%).
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