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Macroeconomics: The Day Ahead for 20 December

  • Digesting UK inflation, Japan Tarde, German PPI & Consumer Confidence, awaiting US & Eurozone Consumer Confidence, US Existing Home Sales, ECB Lane speech; US 20-yr auction
  • UK CPI: another downside miss paced by petrol prices and recreation, sharp drop in core and Services good, but much more needed for BoE to ease back on ‘high for longer’ narrative
  • US Consumer Confidence: modest recovery seen on lower gasoline prices and mortgage rates, equity market strength
  • Eurozone Consumer Confidence seen improving, but range bound; German and Dutch readings impart upside risks


A busier day awaits in statistical terms, though the focus remains on central bank policy narratives, as markets wind down for the holiday period ahead of the new year. There are the expected no change in China’s 1 and 5-yr Loan Prime Rate fixings, Japan Trade, the gamut of UK inflation indicators and German PPI and Jan GfK Consumer Confidence to digest. Ahead lie US and Eurozone Consumer Confidence and US Existing Home Sales, and perhaps most poignantly a speech by ECB chief economist Lane on the economic and policy outlook, which is accompanied by the minutes of the BoC policy meeting that follow the higher-than-expected CPI data yesterday, and a determined push back from governor Macklem on rate cut speculation.


** USA/Eurozone – Dec Consumer Confidence ** 

US Consumer Confidence gets an early release with a modest gain to 104.0 from 102.0 expected, likely paced by lower gasoline prices and mortgage rates, and the strength of the equity market, with the labour differential likely getting particular attention, which has declined significantly, but remains at a historically robust level. Eurozone Consumer Confidence is expected to edge higher to -16.3, but would remain in the tight -17.5/-15.1 range that it has been in since April, though a clear improvement on 2022, but historically it is still very weak, even if the pick-up in both German and Dutch national measures imparts some upside risk vs. the consensus forecast. The German Consumer Confidence was notable for big jumps in Income Expectations (-6.9 vs. prior -16.7) and Willingness to Spend (-8.8 vs. -15.0), despite a very modest rise in Economy Expectations (-0.4 vs. -2.3).


** U.K. – November CPI **

Some more welcome relief for consumers and the BoE, with CPI falling -0.2% m/m to take the y/y rate down to 3.9%, lowest since September 2021, and more notably larger falls in Core 5.1 y/y vs. expected 5.6% (Oct 5.7%) and Services 6.3% vs. expected/Oct 6.6%, though both remain very high, even if the downtrend in recent months has proven stronger than expected. The largest drag by far in m/m terms was Transport (-0.24 ppt or -1.7% m/m) thanks to petrol prices, though recreation (-0.05 ppt), while Utilities continue to be the biggest drag in y/y terms at -0.48 ppt. There remains some Food price pressure (0.3% m/m, but down to 9.2% y/y), and Restaurants/Hotels (0.3% m/m 9.6% y/y), and still immense pressure on Transport Insurance (43.3% y/y). While this will inevitably boost market rate cut hopes, the outright levels of both core and Services CPI remains far too high for the BoE to take its foot off the pedal on rates, or push back on market rate expectations.

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