Written Commentary
Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
- Optically busy schedule, but German ZEW and busy run of US data the only likely market movers; plenty of central bank speakers; bond auctions in UK, Germany and USA
- Germany ZEW: DAX performance points to upside risk on Expectations, but Current Conditions to continue to signal growth contraction
- US Retail Sales: auto sales slide, mean reversion and bad weather all expected to weigh, some offset from gasoline price surge; market already looking at March/April
- US Industrial Production: utilities expected to boost headline despite Texas outage; Manufacturing seen eking out small gain; supplier delivery constrains impact?
- US NAHB Housing Market Index: seen holding at high levels, housing still the key bright spot despite rising mortgage rates
EVENTS PREVIEW
Today’s calendar of data and events is optically a very busy one, though in practice the data schedule boils down to the German ZEW survey and the raft of US statistics, amongst which Retail Sales and Industrial Production will be the primary potential market movers. In event terms, there are the wholly unsurprising RBA minutes to digest and a relatively busy run of central bank speakers ahead, while there are govt bond auctions in the UK (3 & 33-yr), Germany (2-yr) and the US (20-yr). While totally value free as an indicator on the economy, Germany’s ZEW Expectations will likely beat expectations of a small gain, above all given the jump in the DAX with which it is so heavily and horribly correlated, but the gap with a very contractionary Current Conditions is set to remain colossal – see chart.
U.S.A. – Retail Sales, Industrial Production & NAHB Housing Market Index
After the unexpectedly strong, stimulus check driven 5.5% m/m surge in January, a mean reversion was always likely, with very bad weather across much of the US only adding to the downward drag, even if the 7.0% m/m jump in gasoline price will provide some offset. The consensus looks for a drop of 0.4% m/m, with the already reported sharp 5.5% m/m drop in Auto Sales weighing heavily in the equation, both ex-Autos & Gas and the Control Group measure are seen falling by 0.4% and 0.6% respectively. An outlier and perhaps some substantive revisions to January are quite strong possibilities, but these will be looked through, given that the latest round of stimulus checks are set to hit accounts by the end of this week, and give March and April sales a substantial boost, particularly given the ongoing roll-back of activity restrictions in many states. Industrial Production is forecast to post a 0.4% m/m rise, though Manufacturing Output is seen up just 0.1% m/m, though here too an outlier is possible, above all as Utilities Output should have seen a strong overall boost from the bitterly cold weather even if the Texas big freeze outage will provide a considerable offset; extraction/mining is also likely to have been a drag. Rather more difficult to assess is the extent to which supply constraints will dampen manufacturing, with the labour data manufacturing hours dipping, but offset by a solid 21K rise in manufacturing employment. The NAHB Housing Market Index is expected to be little changed for a third month at 84, with risks perhaps to the downside as rising mortgage rates adds to pressure on developer margins from a rapid pick-up in raw materials cost; nevertheless housing remains an indisputable bright spot in the US economic landscape.
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