The Economic Week Ahead

Main Macro Events This Week

The immediate focus will be on the U.S. government which went on partial shutdown in the wee hours on Saturday as the Senate failed to pass a continuing resolution. Critical government services will remain open, though many will work without pay. And if the standoff lasts into Monday, thousands of workers will be furloughed. This situation is nothing new, with the last occurrence in 2013, and there’s no significant impact on the economy. Once past the shutdown hoopla, focus will return to a series of central bank meetings with the BoJ and ECB.

United States: In the U.S. the first FOMC meeting of 2018 is on the horizon, January 30, 31, but no changes are expected. This will be the last meeting chaired by Ms. Yellen, while it will include the new voting rotation with Williams, Mester, Bostic, and Barkin. Meanwhile, we’re still waiting for the Senate to confirm Jay Powell as the new Fed chairman. Meanwhile, the economic calendar includes a number of releases, headlined by the Advance Q4 GDP report and durable orders at the end of the week, along with housing stats. The slate kicks off with an update on the Chicago Fed national activity index (Monday), followed by the Richmond Fed index (Tuesday). MBA mortgage applications are due (Wednesday), along with FHFA home prices, Markit PMIs and December existing home sales. Advanced goods trade deficit is forecast to narrow to -$69 bln in December (Thursday) from -$70 bln, while initial jobless claims are set to rebound 15k to 235k from 45-year lows of 220k for the January 20th week. New home sales are expected to ease 12.7% to a 640k pace in December from 733k highs (+17.5%) in November (Thursday) and leading indicators are on tap to rise 0.2% in December from 0.4% in November. The week rounds out with advance Q4 GDP (Friday) set to increase 2.8%, a tad slower than 3.2% in Q3.

Canada: the calendar is highlighted by the December CPI, but we also receive the final reports that inform the November GDP estimate. Wholesale trade begins the week (Monday), with an 1.0% gain expected for November shipment values following the 1.5% rise in October. Retail sales (Thursday) are expected to grow 1.2% in value terms during November after the 1.5% increase in October. The CPI (Friday) is projected to slow to a 1.9% y/y pace in December from 2.1% in November.  November average weekly earnings (Thursday) are expected to edge 0.1% higher (m/m, sa) after the 0.1% dip in October. The January CFIB Business Barometer Survey of small and medium business sentiment is scheduled for release on Thursday.

Europe: The ECB meeting is the big event risk for this week. Speculation of a major shift in guidance has been running high since the release of the minutes and clearly the hawks at the council have been more vocal in the run up to the meeting. Still, Vice President Constancio stressed that while officials agreed that the guidance will have to change ahead of the end of the current QE program, he also stressed that this doesn’t have to happen immediately. And with officials fretting about the recent EUR strength, only small language changes and no firm commitment to the end of net asset purchases, is expected. Still, it is clear that the ECB is on the way to phase out net asset purchases in the last quarter of this year, either in gradual steps, as the doves will favor, or by just stopping purchases from October onwards. Data releases, meanwhile, focus on an almost full round of confidence numbers, with PMI readings and German ZEW and Ifo surveys ion tap.

UK: The calendar this week brings monthly government borrowing data (Tuesday), the January CBI surveys on industrial trends and distributive sales (due Tuesday and Friday, respectively), the monthly labour market report (Wednesday), and the second estimate for Q4 GDP (Friday).

Japan: The BoJ announces its decision (Tuesday), and no change in rates or the policy stance is expected, despite the minor tweak to bond purchases made on January 9 when the Bank trimmed its purchases of longer dated JGBs. The markets may have gotten ahead of the BoJ’s timeline in terms of discussing normalization. As for data, the November all-industry index (Tuesday) is penciled in rising 0.8% on the month after the 0.3% October gain. The December trade report (Wednesday) should reveal a widening of the surplus to JPY 600.0 bln from 112.2 bln previously. December national CPI (Friday) should show the overall index rising to a 1.0% y/y pace from 0.6% previously, with the core reading at 1.0% y/y, from 0.9%. Tokyo January CPI (Friday) is expected unchanged at 1.0% y/y overall, and steady at 0.8% y/y on a core basis. December services PPI (Friday) will likely be unchanged at 0.8%

Australia: The calendar is empty of top tier economic data and Reserve Bank of Australia events. The Bank’s event schedule is empty until the policy meeting on February 6. The calendar is empty of top tier economic data and Reserve Bank of Australia events. The Bank’s event schedule is empty until the policy meeting on February 6.

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Andria Pichidi

Market Analyst


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