Independent Strategy

Macro Category

US

13th February, 2020 » US January CPI

CPI recorded a modest rise in January, headline up to 2.5% yoy from 2.3%, a shade above mkt estimates.  Core flat at 2.3% yoy which was a touch above consensus too, but really not much more than rounding.  Overall the inflation picture still looks fairly settled.

Tracking the strong ADP release on Wednesday, the January non-farm payrolls report also comfortably beat expectations.  Weather has helped a bit last couple of months, with seasonal disruptions lower than normal, but that doesn’t detract from the underlying strength of the labour market.

The expected bounce in German factory orders remains elusive with a further sharp (-2.1% m/m) decline recorded in December.  That leaves the y/y rate at a scary -8.6%, a new low and overall orders now 12.6% from their peak using the seasonally adjusted volume numbers.

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…

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.

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.

Does populism pose a risk to markets in 2019?  Yes! but not from the expected quarter. 2019 brought a surprise on the European front.  The support for traditional parties has been plummeting for a long time.  We call this the European souffle where support for the centre ground continues to cave over time.  Populist parties gained 20% or more of the vote in many national elections this year, thought there were signs of their vote stabilising in the most recent polls.

Better performance from industry during November, IP and manufacturing production both rising 1.1% mom.  Partly this was due to one-offs, following disruptions from the GM strike, which flattered November’s bounce.  There are still a couple of sectors that look weak, notably chemicals and machinery, the latter in particular important given this is basically the capital goods part of activity.

US

13th December, 2019 » US November Retail Sales

Another batch of soft numbers.  Although we saw another m/m rise and a mild upward revision, the y/y growth rates continue to look fragile, particularly when stripping out more volatile items like gas and vehicle sales.  The control group reading in fact dropped to the weakest rate since March, when comparing to the period a year earlier.

China

10th December, 2019 » China November Inflation

The strong upswing in Chinese consumer price inflation in November has a very straightforward explanation.  The swine flu epidemic and the devastation this has inflicted on Chinese pig herds – reducing total numbers by over 40%.  Indeed, meat prices are up 74% yoy, driven by pork which is now up 110% compared to the same period last year.

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.

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.

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