Independent Strategy

Macro Matters

November 2019

Independent Strategy Blog: Macro Matters

US Impeachment process looks likely to go on for a little longer than expected.  Pelosi’s initial hope that things could be wrapped up by Christmas, so the Democrats could start the new year on a clean slate, focused on the Presidential primaries and campaign looks hopeful now.  Pelosi has always felt the impeachment process was always driven by the left wingers in the party and never had a credible chance of success.  By delaying the process, it prevents the House from pursuing more important business such as delivering on the campaign promises of the mid-terms.

October retail sales registered a further deceleration in growth.  The control group is still showing a decent rate of y/y expansion but other groups momentum has clearly reversed from the summer pick up.  The industrial production report was bleaker reading.

UK Russia dossier a bit of a non-event.  Attracted some media attention but sources suggest that the content is largely benign.  The main criticisms contained within was that the UK was ill-equipped to deal with this type of interference, largely because they had not expected it.  Seems a little surprising that the PM would veto publication given the content.  There is nothing that screams conspiracy.

Quite a slowdown in credit growth during October, certainly compared to the rate we saw last year.  While the trend for shadow sector deleveraging continues there was also quite a sharp slowing of bank loans.  Corporate bond issuance remained muted while there was a pronounced deceleration in the ‘other’ category, which now encompasses local government bond issuance.

US

6th November, 2019 » US Q3 (Prelim) Productivity

A rather disappointing first assessment of US productivity in the third quarter.  Non-farm productivity registered the first qoq decline since the end of 2015.  On the positive side the yoy rate still looks a reasonable 1.4%, compared to a 5-year average of 1.1%, but the trend still lacks much conviction.  Really, we’re still flatlining at best.  Labour costs were stronger than expected, rising at a 3.6% annualised rate in the non-farm sector overall.  That’ll raise the heckles of the hawks that view the tight labour market as a risk.

A modest bounce in German factory orders in September (+1.3% m/m wda), which has pared the yoy decline a little.  But at -4.6% yoy orders are still clearly a weak spot, having recorded 13 consecutive months of yoy declines.  That leaves total orders around 10% below their late 2017 peak.

US

5th November, 2019 » US October PMIs

We now have the final October purchasing managers indices for October and the data paints something of a mixed picture.  That could be seen as slightly encouraging given our concerns that the economic soft spot was turning into something more damaging.

US

1st November, 2019 » US October Payrolls & Wages

Solid payrolls report with 128k jobs added, with the strong upward revisions to September and August, which further dampened concerns about the labour market slowdown.  Clearly there has been a deceleration in job creation, but it looks pretty mild based on these rough estimates (employment date subject to heavy annual revisions so not the best indicator of the real-time health of the labour market at potential turning points).

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