The Economic Week Ahead

Main Macro Events This Week

United States: December retail sales (Friday) will be the week’s key data. A very modest 0.1% clip is forecast, with an ex auto gain of 0.3%, versus November 0.2%, 0.3% respective increases. Industrial production is also due and is seen slipping 0.2% in December after a 0.6% November drop, while capacity utilization slumps to 76.7% from 77.0% previously. The latter was the lowest since January 2014. The January Empire State manufacturing index and preliminary consumer sentiment index are also on tap, and will be some of the freshest indicators on the economy. The Empire State index should be little changed at -4.0 versus December’s -4.6. That would be the 6th straight month in negative (contractionary) territory. Consumer sentiment is forecast edging up to 92.8 from the prior 92.6, but the meltdown in stocks to start the year suggest there’s risk of a measurable decline. December PPI will round out the day and readings of unchanged for the headline and +0.1% for the core are forecast following November’s gains of 0.3% for both the headline and core rates. Other data this week includes the November JOLTS report (Tuesday), the Treasury budget for December (Wednesday), and trade prices (Thursday). The job openings report should reflect the ongoing firmness in the labor market. The Treasury is seen announcing a $4 bln budget deficit for December, compared to a $1.9 bln surplus last year. Import prices are expected to tumble 1.4% in December after the 0.4% November dip as weak oil prices remain a big drag. Export prices should drop 0.5% after the prior 0.6% decline.  And, it’s Q4 earnings season again and damp profit reports or negative outlooks could keep equities on the back foot. Alcoa kicks off today after the market close.

Canada: Canada’s calendar is front loaded this week, with the Bank of Canada’s Q4 Business Outlook Survey and December housing starts due today. The Outlook Survey is expected to show a modest improvement in sentiment, with the future sales growth measure projected to rise 4.0 points to 20.0 in Q4 after bouncing 8.0 points to 16.0 in Q3. Look for an ongoing divergence between firms that are directly or indirectly tied to the recourse sector and those firms that are not. Housing starts are projected to slow to a 200.0k unit rate in December from the 211.9k clip in November. Additional housing figures are out later in the week: The December Teranet/National Bank HPI (Wednesday), the November new housing price index (Thursday) and December existing homes (Friday) are all expected to reveal ongoing regional divergence. Events are lacking from the Bank of Canada until the announcement and Monetary Policy Report on January 20. We expect no change in rates alongside a modest reduction in the growth outlook that leaves the expected gradual recovery in place over 2016 and 2017.

Europe: This week’s data releases won’t change the ECB outlook much. There are a bunch of final inflation numbers from Italy, Spain and first releases from France, Ireland and Portugal, but with overall Eurozone numbers already released these are unlikely to attract too much attention. The same holds for Eurozone trade data and even Eurozone industrial production, which are too backward looking to change the outlook. Germany will release the first estimate of full year 2015 GDP data on Thursday, which we see at 1.7%, up slightly from the 1.6% in 2014. Events include a German 10-year Bund sale on Wednesday and Eurogroup and Ecofin meetings, with Brexit talks and the refugee crisis still high on the political agenda in Europe.

United Kingdom: The UK data agenda this week is relatively quiet.  Industrial production figures (Tuesday) has us expecting a 0.1% m/m rise in November.  The December BRC retail sales survey (also Tuesday) should be robust. The calendar is highlighted this week by the monthly BoE MPC meeting (Thursday).  We expect the vote to remain unchanged from last month, with 8-1 in favour of leaving the repo rate at its historic low of 0.5%.

China: China’s calendar this week is light. December trade report is due Wednesday, and is expected to reveal a narrowed surplus of $50 bln, as compared to November’s $54.1 bln.

Australia: Australia’s calendar is highlighted by the employment report (Thursday), which is expected to reveal a 30k pull back in December after the 71.4k surge in November that strained the credibility of the report. The unemployment rate is expected to rise to 6.0% in December from 5.8% in November. Housing investment (Friday) is seen falling 1.0% m/m in November after the 0.5% dip in October. ANZ job ads (today) are projected to slip 0.5% in December after the 1.3% bounce in November. The RBA remains on its customary intermission from appearances or events during January, with the February 2 meeting the next event on their calendar.

Japan: In Japan, the November current account surplus (Tuesday) is seen narrowing to JPY 1.00 tln from the previous 1,458.4 tln. December bank loans (Tuesday) are expected up 2.4% y/y from 2.3%, while December consumer confidence (Tuesday) likely ticked down to 42.5 from 42.6. November machine orders (Thursday) are forecast to fall 9.0% m/m after a 10.7% gain in October. Finally, December PPI (Thursday) is seen unchanged at -3.6% y/y.