EC Little Resolution In The Week Ahead

The US reports December retail sales. Households splurged in November, when retail sales, excluding autos, gasoline, and building materials, jumped by 0.9%.  A still-strong 0.4% gain is expected in December.  If so, it would be the strongest three months for core retail sales in seven years.  January industrial output and manufacturing production may have ground to a halt in January, but the early data for February, like the Empire State manufacturing index, is expected to rebound.  Meanwhile, headline January CPI was likely dragged lower by the drop in oil prices, but the core rate is likely to remain firm a little above 2%.  

The world's second economy restarts after the week-long celebration of the Lunar New Year. Given that it is the most important trading partner for some many countries, Chinese import and export figures are closely watched.  China's trade surplus is poised to narrow sharply in January.  Chinese reserve figures always attract attention.  A small increase in reserves might not translate into more Treasury holdings, but it would lend support to ideas that the downside pressure on the currency eased in January (when the yuan rose above 2.6% against the dollar).  Low CPI and PPI readings would play on fears of deflationary impulses, and a disappointingly weak report could spur speculation of a rate cut or a reduction in the required reserve ratios.  

Data from Europe will not shed much fresh light.  However, data last week gives the first hints that Germany has worked through its auto issue. The flash PMI readings are due February 21, and some improvement is looking likely.  The UK has a full slate of economic reports including Q4 GDP (the Bloomberg consensus calls for a 0.3% quarterly pace for 1.4% year-over-year, which would match the 2018 average and make for the weakest year since 2009's contraction). The GDP data will take the bite from the December data, which clears the deck for the January data.  It includes CPI (flat) and retail sales (a small rise is expected after a large drop in December).

Lastly, Japan will report Q4 GDP.  The world's third-largest economy contracted by 0.6% in Q3 18, largely due to natural disasters.  While there is no doubt the economy recovered in Q4, it probably was not economy to offset the decline.  The median forecast is for the Japanese economy to have expanded by 0.4% in Q4 as both consumption and investment rebounded. Disappointingly, the GDP deflator may have slipped further to -0.4% from -0.3%.  

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Read more by Marc on his site Marc to Market.

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Gary Anderson 10 months ago Contributor's comment

One of your best, Marc. The insanity of getting state owned enterprises to pull out of the Chinese economy, when their participation has lifted millions of Chinese out of poverty, is pure American insanity. The US is trying to manage capacity utilization in China. That is truly invasive. Meanwhile Huawei is not permitted to sell to the west. China really should go on its own, with the rest of the world. after Trump slaps massive tariffs on Europe, that union will see who is really making trouble for the world. Us!

Kurt Benson 10 months ago Member's comment

Yes, excellent article!