The Economic Week Ahead

Main Macro Events This Week

United States: After the holiday break today (Martin Luther King, Jr. Day), the U.S. economic calendar may offer only limited last-minute insight for the Fed ahead of its policy decision the following week. Not that the markets care, having already priced the Fed out of the picture near-term following the resumption of Asian influenza in the oil and equity markets. The NAHB housing market index is forecast to rise to 62 in January from 61 (Tuesday), while CPI is expected to be a tame at unchanged headline and 0.2% core (Wednesday) and housing starts should rise 0.4% to a 1,178k pace in December. The Philly Fed index may rebound to -7.0 in January (median -5.5) vs -10.2 and initial jobless claims are forecast (Thursday) to sink 15k to 269k for the January 16 week. Existing home sales may snap back 11.3% to a 5.3 mln pace in January relative the 10.5% plunge in December (Friday), with the leading indicators is set to dip 0.1% in December from 0.4%.

Canada: Economic data features manufacturing and wholesale trade (Wednesday). Those reports will be lost in the glare cast by the BoC announcement later that same day, but will provide another round of clues on how Canada’s economy performed in Q4. We expect a 0.7% gain in manufacturing shipments and a 0.5% rise in wholesale shipments, which would be suggestive of some growth in the total economy after the disappointing stall-out in October GDP. The week ends with CPI and retail sales (Friday). CPI is expected to accelerate to a 1.8% y/y pace in December from the 1.4% clip in November, but the pick-up is due to a more difficult annual comparison. CPI is seen falling 0.3% m/m in December, driven by falling gasoline prices. Core CPI is expected to pick-up slightly to a 2.1% y/y clip in December from 2.0% in November, although the index is expected to show a 0.3% m/m drop that is in line with seasonal trends. Retail sales are projected to rise another 0.1% in November after an identical anemic gain in October, with the ex-autos aggregate seen up 0.3% after the flat reading in October.

Europe: Data releases during the week will only fuel the fears of the doves. Final December inflation readings are likely to confirm the German HICP rate (Tuesday) at just 0.2% y/y and the overall EMU HICP number (Thursday) at the same level. Core inflation remains higher at 0.9% y/y, but even this is still far away from the 2% upper limit for price stability and against expectations for an uptick in the headline rate at the end of last year.

United Kingdom: A busy data week looms, which arrives with sterling underperforming and Gilts outperforming as markets push back BoE tightening expectations. We expect data this week will side with this theme, which will includes December inflation data (Tuesday), monthly labour market data, covering November and December (Wednesday), retail sales for December and monthly government borrowing numbers (Friday). We forecast headline CPI at 0.1% y/y in December (median same), unchanged from November. Core CPI is also expected unchanged, at 1.2% y/y (median same). Ebb in economic momentum, renewed energy price declines, and abating wage growth suggests the inflation outlook will remain a benign one for now. Labour data has us expecting an unchanged reading in the official ILO unemployment rate of 5.2% in November (median same). The December claimant count rate is seen rising by 2.9k, down from 3.9k in the previous month. Of particular interest will be average household income, as this is a metric being closely monitored by the BoE. We expect to see a further whittling in wages, to 2.1% y/y from 2.4% and to 1.8% y/y from 2.0% in the ex-bonus reading in data covering the three months to November. We anticipate retail sales to have fallen by 0.2% m/m in December (median -0.3%). The annual comparison is expected at +4.4% after 5.5% growth in the previous month.

China: In China, Q4 GDP (Tuesday) is seen at a 6.5% growth rate, slower than Q3’s 6.9% clip, and disappointing the government’s 7.0% projected pace. With all the recent concerns over growth, this data point will have potential to move global markets. The remaining releases all are due on Tuesday December industrial output will be important for the general outlook and expectations are for a 6.1% y/y growth rate, versus the 6.2% seen in November. December retail sales are penciled in at 11.1% y/y from the prior 11.2%, while December fixed investment likely inched down to 10.1% y/y from 10.2% in November. December foreign direct investment is seen sliding to 1.0% y/y from the previous 1.9% pace.

Australia: Australia’s calendar lacks nourishing top tier data this week, and the Reserve Bank of Australia (RBA) drought continues. However, some second tier economic reports are on the slate: the TD-MI inflation gauge (Monday) and November HIA new home sales (Thursday) may be of some interest. The RBA remains on its customary intermission from appearances or events during January, with the February 2 meeting the next event on their calendar. The RBA left rates at 2.00% in the December 1st meeting, and our base case is for steady policy to begin the New Year. As expected data this week would be supportive of no change in policy at the February meeting.

Japan: In Japan, revised November industrial production (Monday) is expected unchanged at -1.0%. The November tertiary index (Monday) is forecast to have fallen 0.7% m/m, after rising 0.9% in October. On Thursday, the November all-industry index is expected at 0.5% m/m from the 1.0% increase seen in October.

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