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22 Feb 2016
Key events ahead in G10 - Nomura
Analysts at Nomura offered the key events for the week ahead.
Key Quotes:
"Headline Events (all times are GMT) 1. US: Durable goods orders (Thursday 13:30), Q4 GDP (2nd estimate) (Friday 13:30), Personal Income and Spending (Friday 15:00), Core PCE (Friday 15:00) 2. Japan: All-Japan CPI (Thursday 23:30) 3. Europe: Euro PMI (Monday 09:00), UK GDP (Thursday, 09:30), Inflation (Friday), Riksbank minutes (Monday 08:30)"
"Next week will be data heavy for the U.S., with highlights on key consumer spending, price and sentiment data, home sales and manufacturing, and the second estimate of Q4 GDP. On durable goods orders, The ISM manufacturing new orders sub-index managed to increase just outside contraction territory in January and industrial production of durable goods rose modestly, suggesting that manufacturing activity was better in January."
"However, our economists expect continued headwinds in the manufacturing sector, with activity likely to continue to be tepid (forecasting durable goods ex. Transportation rose by 1.2% and total durable goods up by 2.0%)."
"On GDP, we see the potential for weaker-than-assumed inventory investment to be a drag on growth, and we expect Q4 GDP to be revised down by 0.3pp in its second estimate, to 0.4% from 0.7%. The combination of falling NFP growth and an acceleration in average hourly earnings points towards steady growth in personal income of 0.4% in January.
On spending, the 0.6% increase in core retail sales sets a high base for overall consumer activity in January, and a likely increase in energy spending in January due to an increase in heating demand should further support personal spending. Our economists forecast that personal spending jumped by 0.5% in January, after remaining unchanged in December.
"On prices, individual PPI components that are inputs for the core PCE price index, such as major healthcare-related prices, slowed in January, while air transportation prices unexpectedly rose. On balance, our economists assess that residual seasonality will exert upward pressure on core PCE for January, and they are looking for 0.16% m-o-m in the core price index, following 0.043% previously.
The European space will be equally busy with a number of ECB speakers, flash PMIs, and inflation among the highlights. We expect euro area composite PMI to decline for a second consecutive month (a 0.6 point fall to 53.0 in February after a 0.4 point fall to 53.6 in January). An outcome in line with our expectation of the composite PMI would be historically consistent with 0.3% q-o-q GDP growth in Q1. On inflation, we forecast that seasonal price increases in clothing and package holidays and a relative recovery in oil prices will support an increase in German preliminary Feb HICP of 0.6% m-o-m (the rate of CPI inflation is still expected to drop to 0.0% y-o-y from 0.4% y-o-y in January, where we expect negative energy price base effects in February to be the main drag on inflation).
On UK GDP, following weaker releases on both industrial and contribution output, we are now tracking a downward revision (we expect the second estimate to be 0.4% q-o-q, with the expenditure breakdown showing a reliance on domestic final sales).
No major central bank decisions are expected next week; however, we do have the minutes to the recent Riksbank meeting on Monday, which should provide more insight into any intention by the Bank to intervene if SEK appreciation accelerates (although, in our view, intervention is not imminent).
We have expressed our view that the Bank is unlikely to try to push EUR/SEK higher from its current level in the form of a 1M EUR/SEK 9.40/9.25 put spread (see 15bp is not enough for SEK weakness, 17 February 2016). In Japan, we forecast a decline in all-Japan core CPI to 0.1% y-o-y in January, after rising by 0.1% in December. We expect large downward pressure from the core core component and forecast a slowing in January to 0.6% y-o-y, from 0.8% y-o-y in December."
Key Quotes:
"Headline Events (all times are GMT) 1. US: Durable goods orders (Thursday 13:30), Q4 GDP (2nd estimate) (Friday 13:30), Personal Income and Spending (Friday 15:00), Core PCE (Friday 15:00) 2. Japan: All-Japan CPI (Thursday 23:30) 3. Europe: Euro PMI (Monday 09:00), UK GDP (Thursday, 09:30), Inflation (Friday), Riksbank minutes (Monday 08:30)"
"Next week will be data heavy for the U.S., with highlights on key consumer spending, price and sentiment data, home sales and manufacturing, and the second estimate of Q4 GDP. On durable goods orders, The ISM manufacturing new orders sub-index managed to increase just outside contraction territory in January and industrial production of durable goods rose modestly, suggesting that manufacturing activity was better in January."
"However, our economists expect continued headwinds in the manufacturing sector, with activity likely to continue to be tepid (forecasting durable goods ex. Transportation rose by 1.2% and total durable goods up by 2.0%)."
"On GDP, we see the potential for weaker-than-assumed inventory investment to be a drag on growth, and we expect Q4 GDP to be revised down by 0.3pp in its second estimate, to 0.4% from 0.7%. The combination of falling NFP growth and an acceleration in average hourly earnings points towards steady growth in personal income of 0.4% in January.
On spending, the 0.6% increase in core retail sales sets a high base for overall consumer activity in January, and a likely increase in energy spending in January due to an increase in heating demand should further support personal spending. Our economists forecast that personal spending jumped by 0.5% in January, after remaining unchanged in December.
"On prices, individual PPI components that are inputs for the core PCE price index, such as major healthcare-related prices, slowed in January, while air transportation prices unexpectedly rose. On balance, our economists assess that residual seasonality will exert upward pressure on core PCE for January, and they are looking for 0.16% m-o-m in the core price index, following 0.043% previously.
The European space will be equally busy with a number of ECB speakers, flash PMIs, and inflation among the highlights. We expect euro area composite PMI to decline for a second consecutive month (a 0.6 point fall to 53.0 in February after a 0.4 point fall to 53.6 in January). An outcome in line with our expectation of the composite PMI would be historically consistent with 0.3% q-o-q GDP growth in Q1. On inflation, we forecast that seasonal price increases in clothing and package holidays and a relative recovery in oil prices will support an increase in German preliminary Feb HICP of 0.6% m-o-m (the rate of CPI inflation is still expected to drop to 0.0% y-o-y from 0.4% y-o-y in January, where we expect negative energy price base effects in February to be the main drag on inflation).
On UK GDP, following weaker releases on both industrial and contribution output, we are now tracking a downward revision (we expect the second estimate to be 0.4% q-o-q, with the expenditure breakdown showing a reliance on domestic final sales).
No major central bank decisions are expected next week; however, we do have the minutes to the recent Riksbank meeting on Monday, which should provide more insight into any intention by the Bank to intervene if SEK appreciation accelerates (although, in our view, intervention is not imminent).
We have expressed our view that the Bank is unlikely to try to push EUR/SEK higher from its current level in the form of a 1M EUR/SEK 9.40/9.25 put spread (see 15bp is not enough for SEK weakness, 17 February 2016). In Japan, we forecast a decline in all-Japan core CPI to 0.1% y-o-y in January, after rising by 0.1% in December. We expect large downward pressure from the core core component and forecast a slowing in January to 0.6% y-o-y, from 0.8% y-o-y in December."