Key Events In The Last Week Before Christmas

It might be the last full week before Christmas - with both newsflow and trading volumes set to slide substantially - but there’s still a few interesting events and data releases to look forward to next week. Among the relatively sparse data releases schedule, we get US GDP, core PCE, housing and durable goods orders in the US, as well as CPI and GDP across Euro area and UK PMI. After last week's central bank deluge, there are a handful of leftover DM central bank meetings include the BOJ and Riksbank, with rates expected to remain on hold for both. In Emerging markets, there will be monetary policy meetings in Czech Republic, Hungary, Thailand, Taiwan and Hong Kong.

Perhaps the most significant will be in China when on Monday the three-day Central Economic Work Conference kicks off. This event will see Party leaders discuss economic policies for the next year and the market will probably be most interested in the GDP growth target. Deutsche Bank economists have noted that it will be interesting to see if the government will change the tone on its growth target by lowering it explicitly from 6.5% to 6% or fine-tuning the wording to reflect more tolerance for slower growth.

Away from this, tax reform in the US will once again be a topic for markets to keep an eye on with final votes on the Republican legislation in the Senate (possibly Monday or Tuesday) and House (possibly Tuesday or Wednesday) tentatively scheduled. Also worth flagging in the US is Friday’s release of the November personal income and spending reports and the Fed’s preferred inflation measure – the core PCE print. Current market expectations are for a modest +0.1% mom rise in the core PCE which translates into a one-tenth uptick in the YoY rate to +1.5%.

Away from that other data releases in the US include November housing starts (Tuesday), the final Q3 GDP revisions (Thursday) and flash November durable and capital goods orders data (Friday). In Europe, Brexit related headlines should rumble on with the European Commission due to publish its directives for the Brexit transition phase on Wednesday and Heads of mission from EU member states also due to meet on the same day. UK PM Theresa May is also due to meet with her Cabinet on Tuesday.

Also worth flagging are the Catalonia regional elections due on Thursday. According to polls, Podemos could emerge as the potential king-maker with ~10 seats. This ambitious positioning could allow them to support an ERC and Junts pel Cat minority government while keeping the unilateral agenda in check. Alternatively, if Citizens continues on its strong momentum and ends up being the first party accompanied by a strong performance of the Socialists, Podemos could decide to support a minority unionist government. Meanwhile, data releases next week in Europe include the final November CPI report for the Euro area (Monday), December IFO survey in Germany (Tuesday) and final Q3 GDP reports for France and the UK (Friday).

Finally the last of the big four central bank meetings of the year is scheduled for Thursday with the Bank of Japan monetary policy outcome due. No policy changes are expected but given the evidence of a recent new dissenter on the BoJ board calling for more stimulus, it’ll be interesting to see if there is any change in tone.

Summary weekly events from BofA:

  • In the US, we have GDP, PCE and housing data.
  • In the Eurozone, we mainly wait for CPI, consumer confidence, labor costs and construction output. ECB speakers are also on the agenda.
  • In the UK, the main focus is on GDP and public sector net borrowing.
  • In Japan, we wait for the BoJ's monetary policy decision and trade balance.
  • In Canada, we have GDP, CPI, retails sales and the consumer price index.
  • In Australia, RBA December rate meeting minutes, leading index and new home sales will be released. In New Zealand, GDP, trade balance, consumer confidence are on the schedule.
  • In the Scandies, we have the Riksbank rate decision, retail sales and consumer & manufacturing confidence in Sweden while in Norway we wait for the unemployment rate and a speech by Central Bank Governor Olsen.
  • In Switzerland, we wait for sight deposits, trade balance and leading indicator.

A breakdown of key events by day from Deutsche Bank:

  • Monday: Much of the focus on Monday will be on China where the annual Central Economic Work Conference is due to kick off and continue into Wednesday. Also worth watching out for is a possible Senate vote on the Republican tax legislation (this could also come on Tuesday). Datawise the final Euro area CPI report for November is due, along with UK CBI trends orders data for December and the December NAHB housing market index in the US. November property prices data in China will be out in the early morning.
  • Tuesday: Politics is likely to be the main focus on Tuesday too with a possible US House vote on the tax legislation (may also come on Wednesday) and UK PM Theresa May due to sit down with her Cabinet to hash out further Brexit details. Away from that the data calendar is fairly light with the December IFO survey in Germany, Q3 labour costs for the Euro area and November housing starts and building permits data in the US due. The ECB’s Hansson is also due to speak.
  • Wednesday: Expect Brexit headlines to continue on Wednesday with the European Commission due to publish its directives for the Brexit transition phase and heads of mission from EU member states due to meet to discuss Brexit. Away from that data releases include November PPI in Germany, December CBI retail sales in the UK and November existing home sales in the US.
  • Thursday: All eyes will be on Japan in the early morning with the Bank of Japan monetary policy meeting outcome due, followed by Governor Kuroda’s press conference. Away from that we’ll get the third and final revision for Q3 GDP in the US, while the October FHFA house price index and November leading index ill also be out across the pond. In Europe December confidence indicators in France and November public sector net borrowing data in the UK are due. Also worth keeping an eye on will be the regional elections in Catalonia.
  • Friday: A fairly busy end to the week with the main data of note being the November personal income and spending data and core PCE data in the US. Also due out in the US is the flash November durable and capital goods orders data, November new home sales and the final December University of Michigan consumer sentiment reading. In Europe we’ll receive final Q3 GDP revisions for France and the UK and January consumer confidence data for Germany.

Finally, here is Goldman with a focus on key US events and consensus estimates: The key economic releases next week are the third vintage of Q3 GDP on Thursday and personal income and spending report on Friday. There are no scheduled speaking engagements by Fed officials this week.

Monday, December 18

  • 10:00 AM NAHB homebuilder sentiment, December (consensus 70, last 70)

Tuesday, December 19

  • 08:30 AM Housing starts, November (GS -2.5%, consensus -3.2%, last +13.7%): We estimate housing starts edged 2.5% lower in November, reflecting some correction from the sharp rise in the more volatile multifamily starts category in October. We could see a moderate boost from ongoing rebuilding in the South following the Hurricanes Harvey and Irma. While the impact of higher mortgage rates has likely weighed on single family demand and construction earlier this year, we suspect this drag has now largely faded.
  • 08:30 AM Current account balance, Q3 (consensus -$116.5bn, last -$123.1bn)

Wednesday, December 20

  • 08:30 AM Philadelphia Fed manufacturing index, December (GS 20.5, consensus 20.8, last 22.7): We estimate the Philadelphia Fed manufacturing index edged lower in December, though remaining at expansionary levels, consistent with the Empire State manufacturing report last week.
  • 10:00 AM Existing home sales, November (GS +2.5%, consensus +0.7%, last +2.0%): We estimate existing home sales rose 2.5% in November (mom sa) following a 2.0% increase last month that likely reflected continued post-hurricane strength. Our forecast reflects firming in regional housing data tracking closed homes sales in November and strong pending home sales data in October. Existing home sales are an input into the brokers' commissions component of residential investment in the GDP report.

Thursday, December 21

  • 08:30 AM GDP (third), Q3 (GS +3.3%, consensus +3.3%, last +3.3%); Personal consumption, Q3 (GS +2.3%, consensus +2.3%, last +2.3%); The BEA on Thursday will publish the third vintage of Q3 GDP, which we expect to remain at +3.3%, in line with consensus expectations.
  • 8:30 AM Initial jobless claims, week ended December 16 (GS 230k, consensus 234k, last 225k); Continuing jobless claims, week ended December 9 (last 1,886k): We estimate initial jobless claims rose 5k to 230k in the week ended December 16, reflecting a pickup in filings in some states where the level looks abnormally low. However, we expect the overall trend of layoff activity to remain subdued. Continuing claims – the number of persons receiving benefits through standard programs – declined in the previous week, another encouraging sign that the extent of job loss has remained low.
  • 09:00 AM FHFA house price index, October (consensus +0.4%, last +0.3%)

Friday, December 22

  • 8:30 AM Personal income, November (GS +0.5%, consensus +0.4%, last +0.4%); Personal spending, November (GS + 0.6%, Consensus +0.5%, last +0.3%); PCE price index, November (GS + 0.26%, consensus +0.3%, last +0.1%); Core PCE price index, November (GS + 0.11%, consensus +0.1%, last +0.2%); PCE price index (yoy), November (GS +1.79%, consensus +1.8%, last +1.6%); Core PCE price index (yoy), November (GS + 1.52%, consensus +1.5%, last +1.4%): We estimate a 0.6% increase in November personal spending (nominal, mom sa). Based on details in the PPI and CPI reports, we estimate that the core PCE price index increased 0.11% month-over-month in November, or +1.52% from a year earlier. Additionally, we expect that the headline PCE price index rose 0.26% in November, or +1.79% from a year earlier. We estimate a 0.5% increase in personal income.
  • 08:30 AM Durable goods orders, November preliminary (GS +2.0%, consensus +2.2%, last -0.8%); Durable goods orders, ex-transportation, November preliminary (GS +0.6 %, consensus +0.5%, last +0.9%); Core capital goods orders, November preliminary (GS +0.6%, consensus +0.5%, last +0.3%); Core capital goods shipments, November preliminary (GS +0.4%, consensus +0.3%, last +1.1%): We expect durable goods orders to rise 2.0% in the preliminary November report (mom sa), reflecting a pickup in commercial aircraft orders and a deceleration in core measures. Industrial production of business equipment rose a firm 0.5% in the month, and broader manufacturing trends remain strong, according to November- and December-to-date manufacturing surveys. Accordingly, we forecast a 0.5% increase in orders and a 0.4% increase in shipments of core capital goods, and we estimate a 0.6% rise in durable goods orders ex-transportation.
  • 10:00 AM New home sales, November (GS -4.0%, consensus -5.1%, last +6.2%): We estimate new home sales pulled back 4.0% in November after rising to a cycle-high in October. We expect only a partial retracement, consistent with robust regional pending homes sales.
  • 10:00 AM University of Michigan consumer sentiment, December final (GS 96.5, consensus 97.2, last 96.8): We expect a modest decrease in the final reading of the University of Michigan consumer sentiment index for December (-0.3pt to 96.5), reflecting some softness in higher frequency measures of consumer sentiment despite higher equity prices. The preliminary report’s measure of 5- to 10-year ahead inflation expectations rose by one tenth to 2.5% in the preliminary reading.
  • 11:00 AM Kansas City Fed manufacturing index, December (consensus +15, last +16)

Source: BofA, Deutsche, Goldman