Key Events In The Coming Pre-Holiday Week

The key economic releases this week are durable goods and GDP on Thursday. Chair Yellen’s speech on the labor market on Monday afternoon is also likely to garner considerable attention. While the calendar gets quieter in the weeks ahead over the holiday season, there are a few notable macro events to keep traders occupied.

This week, the Bank of Japan and Riksbank deliver their latest policy verdicts, and we also get the RBA Minutes, while in the first week of the new year attention turns to FOMC Minutes and NFP, as well as Eurozone inflation.

BoJ: Maintaining status quo

Consensus expects the BoJ to maintain the status quo, keeping the short rate and JGB 10yr yield target unchanged. The MPM will be watched for clues whether the BoJ still envisions the yield curve as it did in Sep. We expect the governor to quash expectations of an early rate hike, reiterating that the BoJ is prepared to pledge to use fixed-rate operations as needed, with unlimited capacity for purchases.

Riksbank: QE extension but no rate cut

Rates are expected to remain on hold with a small extension of QE of SEK20-30bn in nominal and real bonds. There are limited options left in the monetary policy toolbox, and diminishing returns to even more easing, suggesting that further QE may function more as a tool to prevent excessive strength rather than as a path to further SEK weakness.

In other data

In the US, the main releases this week include existing and new home sales, the final print of Q3 GDP, personal income & spending as well as U. of Michigan sentiment data. After the Christmas break, we get pending home sales, consumer confidence, ISM and trade balance in addition to the FOMC Minutes and NFP.  In the Eurozone, a quiet calendar ahead. In the first week of 2017, we get December inflation data and final PMIs.  A light UK calendar, with public finances data, the final print of Q3 GDP and current account balance this week. We start 2017 with PMIs and the latest Gilt purchase data. In Japan, focus will be on the BoJ, but we also get minutes, labor market data, CPI, industrial production and retail sales in the coming weeks.

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A breakdown of global events on a daily basis, courtesy of Deutsche Bank:

  • The sole release in Europe this morning comes from Germany where the December IFO survey will be released. This afternoon in the US the only data of note are the remaining December flash PMI’s (services and composite readings).
  • Tomorrow morning we kick off in Japan with the BoJ decision followed just after by Governor Kuroda’s press conference. Over in Europe we start with Germany again with the latest PPI print while in the UK the latest CBI reported retail sales data for this month will be out. There’s nothing of note in the US tomorrow afternoon.
  • Wednesday is another quiet day with France PPI, UK public sector net borrowing data, Euro area consumer confidence and US existing home sales data due up.
  • We’ll finally get a bit of action on Thursday. While the morning session is quiet, with Germany’s import price index reading the only data, during the afternoon in the US we’ll get the third reading for Q3 GDP along with a first look at the November durable and capital goods orders data. Also due out will be the November personal income and spending reports, core and deflator PCE readings, initial jobless claims, FHFA house price index, Kansas City Fed’s manufacturing survey and the Conference Board’s leading index.
  • We close out the week in Asia on Friday with the MNI business indicator in China. During the European session we’ll get consumer confidence data in Germany along with the final UK and France Q3 GDP revisions. We finish the week in the US on Friday with new home sales data and the final University of Michigan consumer sentiment reading.

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Courtesy of Goldman, here is a US focused breakdown, with full consensus estimates:

Monday, December 19

  • 09:45 AM Markit Flash US Services PMI, December preliminary (consensus 55.2, last 54.6)
  • 1:30 PM Federal Reserve Chair Yellen Speaks (FOMC Voter): Federal Reserve Chair Yellen will address the University of Baltimore Commencement on the subject of “The State of the Job Market.” In her FOMC press conference last Wednesday (12/14), Yellen referenced the possibility of “some additional slack in labor markets,” but judged that the overall degree of slack “has diminished,” with broader measures such as the U6 having “come down considerably.” Indeed, she compared the current state of the labor market to that of 2007, which she characterized as “in the vicinity of maximum employment.” The text of the speech is expected to be published online, but there will be no audience/media Q&A.

Tuesday, December 20

  • No major data releases.

Wednesday, December 21

  • 10:00 AM Existing home sales, November (GS -0.5%, consensus -1.8%, last +2.0%): Regional housing data released so far suggest a sharp acceleration in closed homes sales in November. However, most of this expected strength is attributable to a favorable calendar shift that the NAR seasonal factors should anticipate (one extra selling day in November and one fewer selling day in October). On a seasonally adjusted basis, we therefore expect a modest decline of -0.5% (mom) following last month’s 2.0% increase. Existing home sales are an input into the brokers' commissions component of residential investment in the GDP report.

Thursday, December 22

  • 08:30 AM Durable goods orders, November preliminary (GS -3.0%, consensus -4.5%, last +4.6%):  Durable goods orders ex-transportation, November preliminary (GS flat, consensus +0.2%, last +0.8%); Core capital goods orders, November preliminary (GS +0.5%, consensus +0.5%, last +0.2%); Core capital goods shipments, November preliminary (GS flat, consensus n.a., last -0.1%): We expect durable goods orders to fall 3.0%, primarily due to retrenchment in commercial aircraft orders following an above-trend reading in October. We expect core capital goods orders to increase 0.5% based on resilience in manufacturing surveys and encouraging commentary from industrial firms. However, November industrial production of business equipment softened at -0.3% mom, so we expect a flat reading for core capital goods shipments. Finally, we expect unchanged durable goods orders ex-transportation, weighed down by a stronger dollar and falling durable goods prices. Over the last year, core capital goods orders declined by 4.3%, while core capital goods shipments declined by 5.0%.
  • 08:30 AM GDP (third), Q3 (GS +3.2%, consensus +3.3%, last +3.2%); Personal consumption, Q3 (GS +2.8%, consensus +2.8%, last +2.8%); The BEA on Thursday will publish the third vintage of Q3 GDP, which we expect to remain at +3.2%. Consensus expects a modest 0.1pp upward revision to 3.3%.
  • 08:30 AM Initial jobless claims, week ended December 17 (GS 255k, consensus 259k, last 254k): Continuing jobless claims, week ended December 10 (consensus 2,010k, last 2,018k); We expect initial jobless claims to remain essentially flat at 255k after 254k last week. Initial claims can be difficult to seasonally adjust around this time of the year, and we see the underlying trend in recent claims reports as fairly stable, reflecting a subdued pace of layoff activity.
  • 09:00 AM FHFA house price index, October (consensus +0.4%, last +0.6%): Consensus expects a 0.4% gain in the FHFA house price index in October, which has risen 6.1% over the past year. FHFA home prices increased 0.6% in September, in line with consensus expectations. The FHFA house price index has a wider geographic coverage than the S&P/Case-Shiller housing price index, but is based only on properties financed with conforming mortgages.
  • 10:00 AM Personal income, November (GS +0.4%, consensus +0.3%, last +0.6%); Personal spending, November (GS +0.3%, consensus +0.3%, last +0.3%); PCE price index, November (GS +0.05%, consensus +0.2%, last +0.24%); Core PCE price index, November (GS +0.05%, consensus +0.1%, last +0.11%); PCE price index (yoy), November (GS +1.5%, consensus +1.5%, last +1.2%); Core PCE price index (yoy), November (GS +1.8%, consensus +1.7%, last +1.7%): We expect personal income to rise by 0.4% and personal spending to rise by 0.3% in November. Based on details in the PPI and CPI reports, we expect core PCE prices to increase by 0.05% in November, or 1.7% from a year ago; we believe risks to this estimate are skewed to the downside. In the November report, core CPI increased by 0.15% month-over-month, or 2.1% from a year ago. Continued relatively moderate inflation readings may temper concerns that Fed policy has fallen behind the curve.
  • 10:00 AM Leading indicators, November (consensus +0.2%, last +0.1%)
  • 11:00 AM Kansas City Fed manufacturing index, December (consensus 1, last 1)

Friday, December 23

  • SIFMA recommends an early 2:00 PM close to bond markets.
  • 10:00 AM New home sales, November (GS +3.0%, consensus 2.1%, last -1.9%): We expect new home sales to rise 3% in November, driven by unseasonably warm weather and a favorable fundamental backdrop. New home sales are highly volatile on a month-to-month basis. While headline housing starts and building permits fell sharply in November, the single-family components remained relatively stable, consistent with continued improvement in homebuilder activity. We plan to closely monitor housing releases in the coming months for signs that higher interest and mortgage rates are constraining home sales, which could in turn affect the outlook for residential fixed investment.
  • 10:00 AM University of Michigan consumer sentiment, December final (GS 98.5, consensus 98.0, last 98.0): We expect the University of Michigan consumer sentiment index to increase further to 98.5 in the December final estimate, following a 4.2pt improvement in the preliminary reading. The Conference Board’s consumer confidence index jumped to a new cyclical high in the November report.

Source: DB, BofA, GS