The first full week of December is shaping up as rather busy, with such Tier 1 data in the US as the payrolls report, durable goods orders and trade balance. We also get UK PMI data and GDP, retail sales across the Euro Area, as well as central bank meetings including Australia RBA and BoC monetary policy meeting.
Key events per RanSquawk
- Monday: UK PM May To Meet EU’s Juncker & Barnier
- Tuesday: UK Services PMI (Nov), RBA MonPol Decision
- Wednesday: BoC MonPol Decision, Australian GDP (Q3)
- Friday: US Payrolls Report (Nov), Japan GDP (Q3, 2nd)
The week's main event takes place on Friday with the release of November’s US labour market report. Consensus looks for the headline nonfarm payrolls to show an addition of 188K jobs, slowing from October’s 261K. Average hourly earnings growth is expected to slow to 0.3% M/M from 0.5%, while the unemployment rate and average hours worked are expected to hold steady at 4.1% and 34.4 respectively. Hurricane induced volatility should be absent from the November release, and consensus points to a headline print much more in-keeping with trend rate.
Other key data releases next week include the remaining October services and composite PMIs on Tuesday in Asia, Europe and the US, ISM non-manufacturing in the US on Tuesday, ADP employment report on Wednesday and China trade data on Friday.
Focus will also fall on Wednesday’s Bank of Canada (BoC) interest rate decision, with the majority looking for the Bank to leave its key interest rate unchanged at 1.00%, although 3 of the 31 surveyed by Reuters are looking for a 25bps hike. Following the BoC’s back-to-back rate hikes in Q3, interest rate markets were pricing in a 40-50% chance of a hike at the upcoming decision, that has now pared back to 25% as the BoC has sounded more cautious in recent addresses, highlighting that it expected the economy to slow (GDP growth moderated to 1.7% in Q3 on a Q/Q annualised basis, from 4.3% in Q2) while stressing that it remains data dependant. RBC highlights that “the BoC has been focused on the consumer’s reaction to the earlier hikes and is content to wait-and-see for the moment. Wage growth – another key metric for the central bank – has improved in recent employment reports (reaching the highest level of growth since April 2016 in November’s report). Despite its softer tone, the BoC continues to stress that “less monetary stimulus will likely be required over time” and as a result the statement will be scoured for any changes in tone. At the time of writing, markets are pricing a 57.2% chance of a 25bps hike in January, with such a move 91.0% priced by the end of March.
November’s Chinese Caixin Services PMI survey will hit on Tuesday. October’s survey came in at 51.2, with the new business sub-index declining for a second consecutive month, while the price-based sub-indices continued to expand. Survey compilers Caixin noted that “the PMIs for October showed that the economy had a relatively weak start to the fourth quarter. However, monetary policy is unlikely to be loosened unless major downside risks emerge.” Friday will bring the release of November’s trade balance, with analysts looking for a surplus of USD 39.50bln, slightly wider than the USD 38.19bln seen in October.
In Japan, the secondary estimate of Q3 GDP will be released on Friday. The preliminary estimate came in at 0.3% Q/Q, and 1.4% Q/Q annualised. Daiwa highlights that “the ministry of finance’s corporate survey for Q3 reported that nominal capex (excluding software) rose 1.0% Q/Q in Q3, with spending up 0.5% Q/Q in the manufacturing sector and 1.3% Q/Q for the non-manufacturing sector. That left overall capex up 4.3% Y/Y, a touch above market expectations. This suggests that a read-across to the national accounts implies an upwards revision to the estimate of real private non-residential investment in Q3 from the advance estimate of 0.2% Q/Q to about 0.6% Q/Q. The decline in public investment, however, might have been somewhat larger than initially thought.” Overall, Daiwa looks for modest upward revisions.
The Reserve Bank of Australia (RBA) meets on Tuesday with little prospect of any meaningful change in communication or guidance for the foreseeable future. 3Q GDP released the day after could impact sentiment. Strong investment, public demand, net exports, alongside a positive base effect, could see GDP spike to 3.2% YoY.
Other releases of note during the week: Monday US Factory Orders (Oct) Tuesday Canadian Trade Balance (Oct) US Markit Services & Composite PMI (Nov) US ISM Non-Manufacturing (PMI) Wednesday US ADP Nonfarm Employment Change (Nov) US Unit Labor Costs (Q3) Canadian Labour Productivity Thursday Canadian Ivey PMI Friday Canadian Housing Starts (Nov) Canadian Capacity Utilisation (Q3) US Wholesale Inventories (Oct)
The Fed is now in its blackout period so there’s no Fedspeak due. The ECB’s Mersch speaks on Wednesday and BoJ’s Kuroda and Masai on Monday and Wednesday, respectively. Euro area finance ministers are also due to meet in Brussels on Monday
In other data
- In the US, busy week with final print of durable & capital goods orders, trade balance, ISM Non-Mfg., non-farm payrolls, labor market report & U. of Michigan sentiment.
- In the Eurozone, we have final print of PMIs and GDP, PPI and retail sales.
- In the UK, we have PMIs, reserve changes, trade balance and mfr & industrial production.
- In Japan, we get monetary base, PMIs, final 3Q GDP print and official reserve assets.
- In China, we receive foreign reserves and trade balance.
- In Canada, beyond BoC rates meeting, we also have building permits and housing starts.
- In Australia, we have RBA rates meeting, PMIs, current account balance, GDP, foreign reserves, home loans and investment lending.
DB's Jim Reid breaks down key global events day by day :
- Monday: Brexit will likely be the key focus for markets today with UK PM Theresa May due to travel to Brussels to meet with European Commission President Jean-Claude Juncker and EU Chief Brexit negotiator Michel Barnier. It’s expected that May will present the UK’s offer on the divorce bill and proposals around the Irish border. Away from this, finance ministers in the Euro area are due to meet in Brussels to discuss the future of the Euro area, vote for a new President, and debate Greece’s bailout review. Finally, notable data releases on Monday include the December Sentix investor confidence reading and November PPI data for the Euro area, and October (final) revisions to durable and capital goods orders and factory orders in the US. The BoJ’s Kuroda is also due to speak in the morning in Tokyo.
- Tuesday: A fairly packed day for data including the final November services and composite PMIs in Europe and the US. The Caixin PMIs will also be released in China. In the US, the October trade balance and November ISM nonmanufacturing will be out.
- Wednesday: Another key date for Brexit talks with the EC College of Commissioners likely to make a recommendation on whether or not sufficient progress has been made, and UK Brexit Secretary David Davis due to address a Brexit Parliamentary Committee. Away from that the most significant data release will be the November ADP employment change report in the US, while final revisions to Q3 nonfarm productivity and unit labour costs will also be released. German factory orders for October will be out in the morning. Away from that the BoJ’s Masai speaks early in the morning, while the ECB’s Mersch speaks later on. In the afternoon UK Chancellor of the Exchequer Philip Hammond is due to speak at the Treasury Select committee.
- Thursday: Politics might well be the main focus for markets again with Germany’s Social Democratic Party due to hold a convention in Berlin. A vote on endorsing coalition talks is expected. Datawise on Thursday we’ll get October industrial production in Germany, the October trade balance in France and weekly initial jobless claims and October consumer credit in the US. Q3 GDP for the Euro area will also be released. November foreign reserves in China is also due, along with the final Q3 GDP revisions for Japan (in the late evening).
- Friday: Front and centre on Friday will be the November employment report in the US with payrolls and average hourly earnings likely to be the biggest focus. Also due out in the US are October wholesale inventories and the preliminary December University of Michigan consumer sentiment reading. Away from the US, November trade data in China, October trade data in Germany and the UK and October industrial production in France and the UK are due. Friday also marks the deadline for US Congress to pass a spending measure and avoid a partial government shutdown.
Finally, here is Goldman's preview of key US events with consensus estimates:
The key economic releases this week are the ISM non-manufacturing index on Wednesday and the employment report on Friday. New York Fed President Dudley has a speaking engagement on Thursday.
Monday, December 4
- 10:00 AM Factory orders, October (GS -0.3%, consensus -0.4%, last +1.4%); Durable goods orders, October final (last -1.2%); Durable goods orders ex-transportation, October final (last +0.4%); Core capital goods orders, October final (last -0.5%); Core capital goods shipments, October final (last +0.4%): We expect factory orders edged down in October following a 1.4% increase in September. Core measures for durable goods were mixed in October, with a decline in core capital goods orders and an increase in core capital goods shipments.
Tuesday, December 5
- 08:30 AM Trade balance, October (GS -$47.8bn, consensus -$47.4bn, last -$43.5bn): We estimate the trade deficit widened by $4.3bn in October. The Advance Economic Indicators report last week showed a much wider goods trade deficit, and we also note scope for retrenchment in service exports, following above-trend growth in recent months.
- 09:45 AM Markit US Services PMI, November (consensus 55.3, last 54.7): Markit US Composite PMI, November (last 54.6)
- 10:00 AM ISM non-manufacturing index, November (GS 59.1, consensus 59.0, last 60.1): We expect the ISM non-manufacturing index to move down 1.0pt to 59.1 in the November report, after rising 4.8pt over the previous two months. We expect a pullback in the supplier deliveries component, which has been elevated recently due to hurricane-related supply chain disruptions. Overall, our non-manufacturing survey tracker rose 0.4pt to 57.8 in November, and we believe underlying growth in the service sector remains at a solid pace.
Wednesday, December 6
- 08:15 AM ADP employment report, November (GS +195k, consensus +190k, last +235k): We expect a 195k increase in ADP payroll employment in November, reflecting a net boost from the financial and economic indicators used in the ADP model. We note uncertainty may be higher than normal, as it is unclear how ADP's methodology addresses hurricane effects in the nonfarm payrolls data that it also uses as an input. The report is likely to be difficult to interpret as a result.
- 08:30 AM Nonfarm productivity (qoq saar), Q2 final (GS +3.3%, consensus +3.3%, last +3.0%); Unit labor costs, Q2 final (GS +0.2%, consensus +0.3%, last +0.5%): We estimate Q2 non-farm productivity will be revised up in the second vintage by 0.3pp to +3.3%, well above the +0.75% trend achieved on average during this expansion. Similarly, we expect Q2 unit labor costs – compensation per hour divided by output per hour – to be revised down by 0.3pp to 0.2% (qoq saar).
Thursday, December 7
- 8:30 AM Initial jobless claims, week ended December 2 (GS 245k, consensus 240k, last 238k); Continuing jobless claims, week ended November 25 (consensus 1,900k, last 1,957k): We estimate initial jobless claims rebounded 7k to 245k in the week ended December 2 after declining in the previous week. The timing of the Thanksgiving holiday may introduce seasonal adjustment difficulties. Continuing claims – the number of persons receiving benefits through standard programs – rose more than expected in the previous week, perhaps related to seasonal adjustment difficulties as well. A sharp pullback in that measure would be encouraging, as it would confirm that the pace of layoffs has indeed remained low.
- 8:30 AM New York Fed President Dudley speaks: New York Fed President William Dudley will give remarks at an event on "Higher Education Financing and Costs and Returns of Higher Education” at the Federal Reserve Bank of New York.
Friday, December 8
- 08:30 AM Nonfarm payroll employment, November (GS +225k, consensus +200k, last +261k); Private payroll employment, November (GS +220k, consensus +200k, last +252k); Average hourly earnings (mom), November (GS +0.3%, consensus +0.3%, last flat); Average hourly earnings (yoy), November (GS +2.7%, consensus +2.7%, last +2.4%); Unemployment rate, November (GS 4.1%, consensus 4.1%, last 4.1%): We estimate nonfarm payrolls rose 225k in November, compared to a consensus of +200k. November job growth likely benefited from additional normalization in hurricane-affected regions. Additionally, the early Thanksgiving this year is likely to boost retail job growth, as relatively more of the holiday hiring will occur before the survey week. The arrival of over 200k Puerto Ricans in Florida (following Hurricane Maria) could also increase payrolls this month. We estimate a stable unemployment rate (4.1%), as the downward trend (-0.3pp over the last three months) seems due for a pause. For average hourly earnings, we estimate +0.3% with upside risk, reflecting somewhat favorable calendar effects and a boost from the unwind of hurricane-related distortions.
- 10:00 AM University of Michigan consumer sentiment, December preliminary (GS 99.5, consensus 99.0, last 98.5): We estimate the University of Michigan consumer sentiment index increased 1.0pt to 99.5 in the preliminary estimate for December. Our forecast reflects the cycle-high reading in the Conference Board measure in November. The report’s measure of 5- to 10-year ahead inflation expectations declined one tenth to 2.4% in November, towards the low end of its 12-month range.
Source: DB, BofA, Goldman