Daily Insight
Group Economics Macro & Financial Markets Research
4 February 2016
Are advanced economies slowing? Maritza Cabezas
turbulence in financial markets…
Senior Economist Tel: +31 20 343 5618 nick.kounis @nl.abnamro.com
US services PMI disappoints likely reflecting worries about global growth and
…but US ADP private payrolls points to resilience of US labour market
Eurozone consumption growth weakened in Q4
Aline Schuiling Senior Economist Tel: +31 20 343 5606 aline.schuiling @nl.abnamro.com
US services PMI disappoints… The US non manufacturing PMI declined to 53.5 in January from 55.3 the previous month. This was lower than consensus (53.7), but remains at levels consistent with modest expansion. The decline was led by business activity, which fell sharply to 53.9 from 59.5 and export demand which dropped to 45.5 from 53.5. The weakness in this report could be a sign that the turbulence in financial markets and uncertainty around global growth, particularly emerging markets could be spreading to the services sector. We expect below trend growth in the first quarter and a moderate expansion thereafter. Domestic fundamentals such as the labour market signal resilience, suggesting the US economy is experiencing a soft patch rather than a downturn. … while US ADP private employment adds 205K jobs in January Indeed, the ADP report showed that private employment for January increased by 205K, following an upwardly revised 267K the previous month. This was slightly higher than expectations (195K). The details of the report suggest that manufacturing was flat, while service providing firms added a net 192K, which is in line with recent trends. The slowdown in job gains was led partly by professional and business services (44K down from 69K) . The ADP report is generally seen as an appetizer for Friday’s nonfarm payrolls report. Nonfarm payrolls on Friday should confirm strength of labour market We look for an increase of 180K in the private nonfarm payrolls and unemployment remaining at 5%, as we think the participation rate to edged up. This is a drop compared to the 275K reported in December. We don’t expect above-trend job growth throughout the year. Job growth should moderate as productivity recovers. The Fed is also looking at overseas threats and their impact for the US economy. If the labour
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Daily Insight – Are advanced economies slowing? – 4 February 2016
market proves resilient, the Fed will likely continue its snail pace rate hikes. We expect the next rate hike in June, but risks are skewed to the downside. Consumption growth in the eurozone slowed down in 2015 Q4 … Eurozone retail sales increased by 0.3% mom in December, following stabilisation in November (revised upward from -0.3% mom). During the final quarter of last year as a whole, sales declined by 0.1% qoq, which was significantly weaker than the 0.7% expansion that was recorded during the third quarter. Indeed, our tracker for private consumption growth suggests that private consumption expanded by around 0.1-0.2% qoq in Q4 after it increased by 0.4% in Q3. The moderate expansion in Q4 is mainly due to strong car sales, with new passenger car registrations growing by almost 4% in Q4, up from 2.5% in Q3. EZ: private consumption growth weakened in Q4 Poll of polls
1.0 0.5 0.0 -0.5 -1.0 03 04 05 06 07 08 09 10 11 12 13 14 15 16 New car registrations & retail sales
Private consumption
Source: Various polling organisations, ABN AMRO Group Economics
… but should pick up again this year Despite the slowdown of private consumption growth in Q4 it is expected to remain an important engine behind growth. It will continue to be supported by low oil prices and an ongoing gradual labour market recovery. On Tuesday, the eurozone unemployment rate for December was published. It fell to 10.4%, down from 10.5% in November, reaching its lowest level since September 2011. Although consumer sentiment edged lower in January, probably due to the turmoil in financial markets, it has remained at a historically high level consistent with solid expansion in consumption.
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Daily Insight – Are advanced economies slowing? – 4 February 2016
Day
Date
Time
Country
Monday Monday Monday Monday Monday Monday Monday Monday Monday Monday Monday
01/02/2016 01/02/2016 01/02/2016 01/02/2016 01/02/2016 01/02/2016 01/02/2016 01/02/2016 01/02/2016 01/02/2016 01/02/2016
02:00:00 02:00:00 02:45:00 09:00:00 10:30:00 14:30:00 14:30:00 15:45:00 16:00:00 19:00:00
CN CN CN NL EC GB US US US US US
Tuesday Tuesday Tuesday Tuesday
02/02/2016 02/02/2016 02/02/2016 02/02/2016
06:30:00 09:55:00 09:55:00 11:00:00
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
03/02/2016 03/02/2016 03/02/2016 03/02/2016 03/02/2016 03/02/2016 03/02/2016 03/02/2016 03/02/2016
02:45:00 02:45:00 10:00:00
Period
Latest outcome
Consensus
PMI manufacturing - index (official) PMI non-manufacturing - index (official) PMI manufacturing - index (Caixin) PMI manufacturing - index PMI manufacturing - index PMI manufacturing - index PCE deflator core - % mom PCE deflator core - % yoy Markit - Flash PMI ISM manufacturing - index Fed's Vice-Chair Fischer speaks on economy and policy
Jan Jan Jan Jan Jan F Jan Dec Dec Jan F Jan
49.4 53.5 48.4 52.4 52.3 52.9 0.00 1.4 52.4 48.2
49.6
IN DE DE EC
Repo rate - % Unemployment - % Unemployment change - thousands Unemployment - %
Feb 2 Jan Jan Dec
6.75 6.2 -20.0 10.40
CN CN EC EC GB EC US US PL
PMI services - index (Caixin) PMI composite - index (Caixin) PMI services - index Composite PMI output PMI services - index Retail sales - % mom ADP nat. employment report - thousands ISM non-manufacturing, index Reference rate - %
Dec Dec Jan F Jan F Jan Dec Jan Jan Feb 3
52.4 50.1 53.6 53.6 55.6 0.3 205.0 53.5 1.5
Thursday Thursday Thursday Thursday Thursday
04/02/2016 04/02/2016 04/02/2016 04/02/2016 04/02/2016
13:00:00 13:00:00 13:00:00 14:30:00 20:00:00
GB GB CZ US MX
Policy rate - % BoE size of asset purchase programme - GBP bn Repo rate - % Output per hour nonfarm business sector - % qoq Policy rate - %
Feb 4 Feb Feb 4 4Q P Feb 4
0.5 375.0 0.1 2.2 3.3
0.5 375.0
Friday Friday Friday Friday Friday Friday Friday
05/02/2016 05/02/2016 05/02/2016 05/02/2016 05/02/2016 05/02/2016 05/02/2016
08:00:00 09:00:00 14:30:00 14:30:00 14:30:00 14:30:00 21:00:00
DE CH US US US US US
Manufacturing orders - % mom Foreign currency reserves - CHF mln Change in employment private employment - thousands Change in employment total - thousands Unemployment - % Trade balance - USD bn Fed Reserve consumer credit - USD bn
Dec Jan Jan Jan Jan Dec Dec
1.5 559682 275 292 5.0 -42.4 14.0
-0.2
-1.0
199 204 5.0 -42.5 14.8
180 190 5.0
10:30:00 11:00:00 14:15:00 16:00:00
Key Economic Indicators and Events
ABN AMRO
48.1 53.2 52.3 51.8 0.11 1.4 48.4
48.0
6.75 6.3 -7.3 10.50
6.75
53.6 53.5 55.4 0.3 199.9 55.2
0.5 180 55.0
-1.4
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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