Macro Weekly Data moving our way
Group Economics
Han de Jong +31 20 628 4201
12 June 2015 Recent economic data has been more in line with our views on the global business cycle than in the last couple of months. US and Chinese data in particularly have started to improve. Japanese data is also firming while the eurozone economy continues to do nicely. The implication is that we can feel more confident that the Fed will hike rates in September, as we have been forecasting for some time. Relief
readings have been better than expected and the rising trend
Our (and your) patience and confidence in our view on how the
is now back in place.
business cycle in the main economies would develop in the course of the year has been tested in recent months. The
Arguably more importantly, US retail sales improved sharply in
optimistic view has been challenged, especially in the US
May. Disappointing consumer spending had been a key
where economic data has consistently undershot expectations
element in a negative narrative. Despite improving incomes
since the beginning of the year. Fears over developments in
and increasing spending power due to lower fuel prices, the
China have also risen as the growth slowdown continued. And
consumer 'did not spend'. The key explanation offered by
with the US and China disappointing, it looked only a matter of
commentators was that households used the extra spending
time for the eurozone recovery to be impacted and for us to be
power to reduce debt levels. Not a bad thing in itself, but not
forced into sharp negative adjustments to our view on the
good for spending and growth in the short term. The May data
global economy.
showed retail sales were up 1.2% mom (April revised from 0.0% to +0.2). Excluding auto and gas, sales were up 0.7%
US NFIB index (small business optimism index
mom. Of course, one data point does not make a trend, but we are encouraged. To me, this improvement makes sense. We
index
must bear in mind that retail sales can be volatile in the short
100
term and hard to explain swings regularly occur. It is better to look at the trend and at the factors driving sales. These factors
95
continue to be positive. Indeed, various labour market statistics released in recent days point to continued strength. The
90
preliminary June reading on the University of Michigan's index 85
of consumer sentiment also showed a significant improvement.
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We have long taken the view that the Fed would start raising rates in September. This is not an easy call. There are a lot of
Source: Bloomberg
uncertainties around the tightening process. I compare it to a journey the Fed is going to take. But many things are unclear.
Recent data has come as a relief. In the previous week, US
What is clear is that they cannot stay where they are forever.
auto sales and the US employment report already were strong.
The direction of their journey is also unambiguous: rates must
During the last couple of days a few more indicators have
go up. Unfortunately, it is unclear where exactly they need to
supported our optimism. Confidence among small businesses
go to and when exactly they need to arrive. They only other
rose convincingly in May. This indicator had refused to improve
thing that looks certain is that they cannot travel very fast. In
much during the 2010-2013 period. It suggested that growth in
such a situation deciding on when to start the journey is a bit of
the US economy was vulnerable as it was not spreading to
a guess. Indeed, it seems that the FOMC is divided on the
small businesses, a crucial ingredient in the economy. But an
issue. However, the key people on the FOMC seem
improvement started in 2014. The trend was reversed during
determined to start the journey within the next couple of
the first couple of months of this year, but the April and May
months. And they have given guidance to that effect.
2
Macro Weekly - Data moving our way –12 June 2015
A rate hike would be the first in almost ten years. If markets
countries to improve competitiveness vis-Ă -vis Germany
are unprepared for the start of the tightening cycle, a first move
without having to get stuck in sustained deflation. Recent wage
could lead to shocks on financial markets. This is, obviously,
settlements in Germany suggest that the mild acceleration in
undesirable. That is why guidance is perhaps even more
wage cost increases will continue.
important now than normally is the case. As the key FOMC members have given guidance trying to prepare us for a rate
The Greek saga is continuing. I have no idea whatsoever if any
hike soon, it would be a mistake not to hike as that would cast
progress is made. Someone I spoke to this week made an
doubt over the value of their guidance. The obvious thing that
interesting observation. He said that both sides have dug
could stop the Fed from raising rates in the near future would
themselves so deep into the trenches that neither side can
have been an unexpected and persistent slowing of economic
compromise. The solution then is to let the situation explode
growth. That is why recent positive data has probably been
before the dust can settle. In particular he argued that the
received with much relief by the Fed. Indeed, our confidence
Greek government cannot go home with any deal as they will,
has increased that a first step in a process of monetary
no matter what, be criticised by their extremist supporters for
tightening will be made in September.
not having achieved enough. He suggested that the ECB should cut off Greek banks from liquidity support. That would
Greece, German IP and labour costs
result in ATMs no longer giving out euro notes. The uncertainty
Important eurozone economic data has been scarce in recent
and chaos would then lead to a quick decision on either to
days. Industrial production in Germany strengthened
accept a deal with the partners or leave the euro. As soon as a
significantly in April: +0.9% mom, a welcome improvement
deal is signed, the liquidity problem can be resolved quickly. I
after a number of soft months. It must be said, though, that
should hope it does not happen like this, but one cannot be
production in France fell as much as it rose in Germany and
particularly optimistic.
production in the eurozone as a whole increased by a meagre 0.1% mom. On a more positive note, the business confidence
Other countries too
indicator of the Banque de France rose in May, its third
Japanese data has recently also improved. Corporate profits
successive increase, suggesting that production growth in
have been strengthening for some time. This has started to
France should pick up.
feed through into higher wages. Higher wages, in turn, are essential in supporting consumer spending. Japanese Q1 GDP
Germany: Labour costs
growth was revised from 0.6% qoq to 1.0%, well ahead of the US (-0.7%) and the eurozone (+0.4%).
% yoy
5
Chinese data also provided some reason to smile. Economic 4
growth has slowed for a while and many commentators have been suggesting that policymakers are letting growth slip
3
through their fingers. It has been clear that policymakers have 2
tried to balance maintaining a reasonable pace of economic
1
growth, while addressing vulnerabilities in a number of key areas (real estate, the financial sector, environmental problems
0 09
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and corruption). This has been a tricky process as measures to prop up growth threaten to make the targets in the other areas
Source: Bloomberg
less achievable. That is why small targeted measures have been taken. Until recently, the declining trend in growth
German labour costs are on the rise. They rose 1.1% qoq in
indicators continued. But recent data shows an improvement.
Q1 and 3.2% yoy. That is good news for two reasons. First, it
Hiring by firms appears to be strengthening, as have retail
indicates accelerating wage growth, which will support
sales and industrial production growth.
consumer spending growth. Second, it will add to inflation pressures in Germany. That is welcome as it will allow other
3
Macro Weekly - Data moving our way –12 June 2015
Main economic/financial forecasts GDP grow th (%)
2013
2014
2015e
2016e
2.2
2.4
2.7
3.1
United States
-0.3
0.9
1.8
2.3
Eurozone
Japan
1.6
-0.1
1.1
1.2
United Kingdom
1.7
2.8
2.8
2.6
China
United States Eurozone
3M interbank rate
04/06/2015 11/06/2015
+3M
+12M
2015e
0.28
0.29
0.7
1.5
0.9
2016e 2.4
-0.01
-0.01
0.00
0.00
0.00
0.10
Japan
0.17
0.17
0.2
0.2
0.2
0.2
United Kingdom
0.57
0.57
0.6
1.5
1.0
2.0
04/06/2015 11/06/2015
7.7
7.4
7.0
7.0
World Inflation (%)
3.2 2013
3.2 2014
3.2 2015e
3.8 2016e
+3M
+12M
2015e
2016e
United States
1.5
1.6
0.1
2.5
US Treasury
2.31
2.38
2.5
2.8
2.7
2.9
Eurozone
1.3
0.4
0.4
1.7
German Bund
0.83
0.90
0.3
1.2
0.5
1.4
Japan
0.3
2.8
0.8
1.4
Euro sw ap rate
1.12
1.18
0.6
1.5
0.8
1.6
United Kingdom
2.6
1.5
1.1
1.9
Japanese gov. bonds
0.47
0.51
0.6
1.0
0.7
1.0
China
2.6
2.0
1.5
2.0
UK gilts
2.03
2.05
1.7
2.5
2.0
2.7
World Key policy rate
4.3 11/06/2015
3.9 +3M
3.7 2015e
3.8 2016e
04/06/2015 11/06/2015
+3M
+12M
2015e
2016e
Federal Reserve
0.25
0.50
0.75
2.25
EUR/USD
1.13
1.12
1.00
1.05
1.00
1.15
European Central Bank
0.05
0.05
0.05
0.05
USD/JPY
124.4
123.4
125
135
128
135
Bank of Japan
0.10
0.10
0.10
0.10
GBP/USD
1.54
1.55
1.47
1.50
1.49
1.51
Bank of England
0.50
0.50
0.75
1.75
EUR/GBP
0.73
0.72
0.68
0.70
0.67
0.76
People's Bank of China
5.10
4.85
4.85
4.85
USD/CNY
6.20
6.21
6.26
6.37
6.30
6.40
10Y interest rate
Currencies
Source: Thomson Reuters Datastream, ABN AMRO Group Economics.
Key macro events Day
Date
Time
Country
Monday Monday Monday Monday Monday Monday Monday
15/06/2015 15/06/2015 15/06/2015 15/06/2015 15/06/2015 15/06/2015 15/06/2015
08:30:00 11:30:00 14:30:00 15:15:00 15:45:00 16:00:00
IN RU US US EC US RU
Wholesale price index - % yoy May Key rate % Jun 15 Empire State PMI - Manuf. general business conditions - index Jun Industrial production - % mom May ECB publishes weekly QE details NAHB home builders' confidence index Jun GDP - % yoy 1Q P
Key Economic Indicators and Events
Period
Latest outcome
Consensus
-2.7 12.5 3.1 -0.3
-2.5 11.5 4.9 0.2
54.0 -2
55.0 -2
Tuesday Tuesday Tuesday Tuesday
16/06/2015 16/06/2015 16/06/2015 16/06/2015
08:00:00 10:30:00 11:00:00 14:30:00
DE GB DE US
CPI - % yoy CPI - % yoy ZEW index (expectation economic growth) Housing starts - % mom
May F May Jun May
0.7 -0.1 42 20.2
0.7
Wednesday Wednesday Wednesday Wednesday Wednesday
17/06/2015 17/06/2015 17/06/2015 17/06/2015 17/06/2015
01:50:00 10:30:00 10:30:00 11:00:00 20:00:00
JP GB GB EC US
Merchandise trade exports - % yoy Claimant count unemployment rate - % Change in claimant count - thousands Core inflation - % yoy Policy rate - %
May May May May F Jun 17
8.0 2.30 -12.6 0.9 0.25
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015 18/06/2015
EZ NL CH CH CH NO GB US US US US US US
Eurogroup meeting about Greece Consumer confidence - index SNB 3-month ibor lower target SNB 3-month ibor upper target SNB Sight Deposit Interest rate Policy rate - % Retail sales - % mom Inflation excl food and energy - % mom Inflation excl food and energy - % yoy Inflation (CPI) - % mom Inflation (CPI) - % yoy Philadelphia Fed - business confidence - index Initial jobless claims
09:30:00 09:30:00 09:30:00 09:30:00 10:00:00 10:30:00 14:30:00 14:30:00 14:30:00 14:30:00 16:00:00 14:30:00
Jun Jun 18 Jun 18 Jun 18 Jun 18 May May May May May Jun
2.0 -1.25 -0.25 -0.75 1.3 1.2 0.3 1.8 0.1 -0.2 6.7 279k
Friday
19/06/2015
JP
Policy rate - %
Jun 19
80.0
39 -3.4
ABN AMRO
11.5
56.0
37 -2.5
2.6
0.9 0.25
0.25
-1.25 -0.25 -0.75 1.0
-1.25 -0.25 -0.75
0.2 1.8 0.4 0.0 7.5
0.2 1.8 0.4 0.0
80.0
80.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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