- MON: Swiss CPI (Jan), Japanese GDP (Q4), German Final
CPI (Jan), Norwegian GDP (Q4), Eurogroup. - TUE: OPEC MOMR; New Zealand Inflation Forecasts (Q1),
UK Jobs Report (Dec), US CPI (Jan), South Korean Revised Trade Balance (Jan),
EZ Flash GDP (Q4). - WED: IEA OMR; UK Inflation (Jan), EZ Industrial
Production (Dec), US Retail Sales (Jan), Japanese Trade Balance (Jan). - THU: Australian Jobs Report (Jan), US Philly Fed
(Jan), US PPI (Jan). - FRI: UK Retail Sales (Jan), Canadian PPI (Jan).
NOTE: Previews are listed in day-order
Japanese GDP (MON):
Q4 GDP is expected to have rebounded to 0.5% Q/Q from -0.2%
in Q3, thus avoiding a technical recession, with the Y/Y forecast at 2.0%
(prev. -0.8%). Desks highlight that the Q3 contraction was mostly led by
private consumption and investments. “The reopening and government travel
subsidy programmes should lead to a great improvement in hospitality-related
activities”, posit the analysts at ING, although elevated inflation likely
limited the upside for the rebound. Looking ahead, desks are less optimistic
about the potential for Japanese GDP growth after Japan joined the US tech
export ban to China.
UK Jobs Report (Tue):
Expectations are for the unemployment in the three months to
December to remain at 3.7%, employment to grow 5k vs. prev. 27k, whilst average
earnings (ex-bonus) are expected to rise to 6.5% 3M/YY vs. prev. 6.4%. The
prior report saw the unemployment rate hold steady at 3.7%, payroll growth in
December was estimated to have increased by 28k on a M/M basis and wage growth
exceeded expectations with the headline earnings metric climbing to 6.4% from
6.2%. Pantheon Macroeconomics suggests that the upcoming release will be of
greater interest to the market than usual ahead of next month’s meeting, with
the MPC pledging earlier this month to “monitor closely… the tightness of
labour market conditions and the behaviour of wage growth.” Pantheon expects to
see “clear evidence of accumulating labour market slack and fading momentum in
wages around the turn of the year”. PM’s view on wages anticipates that Y/Y
growth in Average Weekly Earnings will slow to 3.25% over the next nine months.
Accordingly, the desk thinks that the release should further make the case that
the MPC will hold the Bank rate at 4% (currently priced at 38% vs. 62% for
25bps hike).
BoJ Nominees (Tue):
BoJ Governor Kuroda’s term ends on April 8th. The Japanese
Government plans to present nominees for the new Central Bank head to
Parliament on Feb 14, according to TBS, with the timing guided around 02:00GMT.
Desks believe an announcement on a successor is expected by February 17th.
Nikkei sources on Friday suggested the Government is reportedly likely to
nominate Kazuo Ueda as the new Governor, whilst ex-FSA Chief Hamino and BoJ
Executive Uchida are tipped to be the next Deputy Governors. Ueda previously
served on the BoJ’s Policy Board between 1999 and 2003. The University of Tokyo
Professor has in the past been critical of “Abenomics”. In an article written
in 2016 by the front-runner, Ueda suggested (at the time) “It is unclear how
long the bank can keep buying JGBs at the current pace…BoJ could ease further
by buying more JGBs or by lowering the rate on bank reserves in the near term,
but this would likely only bring forward the day of reckoning.” In the 2016
article, Ueda also said “Higher inflation rates will allow the BoJ to taper JGB
purchases and raise short-term interest rates. JGB yields could increase by
more than inflation and the outlook for fiscal sustainability could worsen
sharply.” Note, Japan’s core inflation rate rose to a new 41-year high of 4% in
December. That being said, initial commentary from the touted BoJ Governor
nominee suggests no rush to exit current monetary policy that is appropriate
and the need to continue easy policy. Moreover, analysts at Rabobank said Ueda
emerging as a likely candidate does not alter their view of BoJ policies – “We
continue to expect a very cautious outlook to prevail with conditions building
for a modest withdrawal of accommodation this year. We expect this would
commence with an adjustment to YCC. We would not, however, expect the BoJ to
move rapidly away from its accommodative stance for fear of destroying the
modest inflationary pressure it is attempting to nurture”, Rabobank said, “Assuming
some relaxation in YCC, we see scope for a move to USD/JPY128 on a 3-month
view. However, a hawkish Fed is likely to limit the scope for JPY appreciation.”
Back to the aforementioned Nikkei piece, current BoJ Deputy Governor Masayoshi
Amamiya is said to have firmly refused the top spot – Amamiya was seen as the
most dovish continuity candidate. Other candidates include – Chairman of the
Daiwa Institute of Research Hiroshi Nakaso – seen as a neutral option, and
described as more “data-driven”, and Nikko Research Centre Chairman Hirohide
Yamaguchi (former BoJ Deputy Governor from 2008-2013) – known as the hawkish
candidate, and not ruling out abandoning yield curve control altogether.
UK Jobs Report (Tue):
Expectations are for the unemployment in the three months to
December to remain at 3.7%, employment to grow 5k vs. prev. 27k, whilst average
earnings (ex-bonus) are expected to rise to 6.5% 3M/YY vs. prev. 6.4%. The
prior report saw the unemployment rate hold steady at 3.7%, payroll growth in
December was estimated to have increased by 28k on a M/M basis and wage growth
exceeded expectations with the headline earnings metric climbing to 6.4% from
6.2%. Pantheon Macroeconomics suggests that the upcoming release will be of
greater interest to the market than usual ahead of next month’s meeting, with
the MPC pledging earlier this month to “monitor closely… the tightness of
labour market conditions and the behaviour of wage growth.” Pantheon expects to
see “clear evidence of accumulating labour market slack and fading momentum in
wages around the turn of the year”. PM’s view on wages anticipates that Y/Y
growth in Average Weekly Earnings will slow to 3.25% over the next nine months.
Accordingly, the desk thinks that the release should further make the case that
the MPC will hold the Bank rate at 4% (currently priced at 38% vs. 62% for
25bps hike).
US CPI (Tue):
Headline consumer prices are expected to rise 0.5% M/M in
January (prev. +0.1%), with the annual rate paring to 6.2% Y/Y from 6.5% in
December due to base effects. The CPI will be underpinned by a small rise in
energy prices and persistent strength in food inflation, Credit Suisse says,
though the sharp fall in used vehicle prices seen in recent months is unlikely
to persist. For the core measure, inflation is likely to have risen by 0.4%
M/M, matching the pace seen in December; though the annual rate is seen slowing
to 5.5% Y/Y in January from 5.7% previously. Credit Suisse says goods prices
continue to face headwinds, but the pace of decline is likely to moderate;
services inflation will continue to be supported by shelter, which the bank
sees remaining elevated for at least a few months before decelerating in H2. CS
is in line with the market consensus, and says that if this is realised, it
would be consistent with inflation eventually returning to 2%, “but any
reacceleration in the monthly run rate for core CPI would be an unwelcome
development for the FOMC,” adding that “combined with January’s strong
employment report, this would likely keep Fed rhetoric hawkish, emphasising the
need for ongoing rate hikes and a low probability of a pivot toward easing this
year.”
UK Inflation (Wed):
Expectations are for Y/Y CPI to fall to 10.3%, with the core
metric expected to decline to 6.2% from 6.3%. The prior report was
characterised by a modest slowdown in the headline rate of CPI to 10.5% from
10.7% with the largest downward contribution to price pressures coming from
lower motor fuel prices, whilst clothing and footwear also dragged the headline
lower; core held steady at 6.3%. For the upcoming release, analysts at Investec
suggest that lower fuel prices and more intense competition amongst retailers
will likely play a role for the headline. Investec cautions that weightings by
the ONS for the inflation basket are somewhat of an unknown, however, it is
plausible that the weight of energy and food prices will be raised in 2023
relative to 2022. For the inflation landscape more broadly, ING highlights “core
services inflation outpaced the Bank of England’s November forecasts and indeed
is showing little sign of peaking”. ING attributes this as being a major factor
behind the MPC’s decision to deliver another 50bps hike this month and as such
will warrant attention for the upcoming report. It is worth noting that there
is still another inflation report due to be released before the March meeting.
In terms of current market pricing, 25bps is priced at 62% for March (vs. 38%
for unch.)
US Retail Sales (Wed):
The headline rate of retail sales is expected to rise 0.9%
M/M in January, paring back some of December’s 1.1% decline. The core measure
of retail sales is expected to be a more subdued +0.4% M/M (prev. -1.1%),
alhtough the Retail Control group is seen falling 0.3% M/M in January after
-0.7% in December. “Retail sales will come in hot to start 2023, likely
increasing by well over 1% after a weak reading in December,” Moody’s Analytics
said, “a surge in vehicle sales will account for about half of the headline
gain, while higher gasoline prices relative to a month prior will also provide
a boost.”
Australian Jobs Report (Thu):
The Labour Force Survey is expected to show the addition of
15k jobs in January (vs prev. -14.6k), whilst the Unemployment and Participate
rates are expected to remain at 3.5% and 66.6%. Desks believe December’s job
losses were related to illness disruptions. Analysts at Westpac “suspect that
illness-related absences and a ‘catch-up’ in summer leave will result in an
employment print slightly below trend, as opposed to another outright decline”,
as their forecast aligns with the Street. The desk also points out that the
unemployment rate at 3.5% is only 0.1ppt off the 50yr low print of 3.4% – “signalling
a still historically tight labour market.”
UK Retail Sales (Fri):
Expectations are for M/M retail sales in January to decline
0.5% vs. prev. -1%. Ahead of the release, analysts at ING note “Real-terms
spending has fallen in 12 out of the last 14 months, and we don’t think January
was an exception. If so, it would point to a modest fall in GDP through the
first quarter”. In terms of recent indicators, the BRC Retail Sales metric for
January printed at 3.9% Y/Y vs. prev. 6.5% with the consortium noting “As
Christmas cheer subsided, retailers felt the January blues as sales growth
slowed. Many retailers discounted heavily to entice consumer spend, and while
there were bargains to be had in the January sales, retailers continue to be
hit by lower margins and falling volumes.” Elsewhere, the Barclaycard Consumer
Spending Report revealed “overall Retail spending grew 3.2% when compared to
the same period last year, up from 1.2% in December 2022. This comes as Grocery
spending increased 7.1% compared to the same period last year, up from 4.9% in
December 2022 as Brits continue to be impacted by rising inflation”.
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