Independent Strategy

Macro Matters

January 2020

Independent Strategy Blog: Macro Matters
US

30th January, 2020 » Cock-a-hoop

Donald Trump is on a roll. He presides over the longest cyclical upswing on record. On his watch, unemployment is…

As we expected, Matteo Salvini was defeated in Sunday’s Emilia-Romagna regional election, providing a much-needed boost to Prime Minister Conte’s fragile government and making a snap general election less likely.

The improvement in the surveys continues to provide a realistic guide to Chia’s improving fortunes with the December real activity data corroborating this picture.  The strong recovery in industrial production is most noticeable, with y/y rate jumping to 6.9%, the highest since March

China December money supply ticked up, reflecting easier financial conditions.  We also saw solid growth in total social financing, which came in ahead of expectations.  The authorities have been keen to avoid an overt debt splurge, trying to generate more targeted easing, particularly focusing on transmission to SMEs in the private sector.  These numbers suggest this has been a partial success...

UK

15th January, 2020 » UK December Inflation

Disinflation resumed in December with consumer prices surprising to the downside.  Headline and core both registered a 1.3% y/y gain, a decline from 1.5% and 1.7% respectively in November.  In constant tax terms the decline was a little faster.  On the producer price side there is scant evidence of any inflationary pressure.  Although headline output prices edged up, core output prices - which are more closely correlated with CPI - ticked a little lower.

On 26 January, the voters of the region of Emilia-Romagna – a long held bastion of the left - will head to the polls.  Such an election would not normally appear on the radar screen of international investors.  But this time it has strong significance as a barometer of the popularity of the current centre-left coalition that was formed in the autumn.

UK economy continued to slow in November.  According to the monthly GDP estimate the economy shrank by -0.3% m/m.  Although the smoothed 3/3m rate still showed a +0.1% rise, this was the slowest pace since fears of a hard Brexit dominated thinking back in the summer and on a y/y basis the +0.6% recorded was the weakest since back in the days of the Eurozone debt crisis (June 2012 to be exact).

Slight undershoot in the December payrolls report, but the 145k jobs created is only modestly below the 164k market guess and while the revisions from November were slightly downward that was a strong report in itself.  Over 12-months revisions are very mildly negative but not showing any real deterioration in trend since the summer.

Germany

9th January, 2020 » German Industrial Production

Germany has just reported much-improved industrial production numbers for November.  In volume terms they jumped 1.1% mom on a seasonally-adjusted basis, better than consensus expectations for a 0.8% rebound.  So the downturn is over?  Don’t bet on it.

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