Jan 12–16, watch for Chinese trade and U.S. industrial output and core inflation

Genevieve Signoret

Macro Views

Next week: the highlights

  • Energy prices exhibit strong downward momentum. In the unlikely event of an upside surprise in this week’s Chinese trade data, expect no more than a transitory boost to energy prices and energy equity valuations.
  • We believe that forex and global fixed income and equity valuations are being driven chiefly by expectations as to Fed policy. Hence our sharp focus on core inflation in the USA. Will the oil price collapse pass through to the core?
  • We have argued here and here that there’s a risk that, although  the medium-term (6–12-month) response to the U.S. and global economies to the drop in oil price will be positive, the more immediate response in U.S. GDP will be negative, owing to the historically positive but quick negative response in oil drilling to oil prices, versus the positive but delayed response in consumer spending, and to the fact that not manufacturing but rather mining and in particular oil and gas drilling is what has been pulling U.S. industrial output up. U.S. industrial output numbers are due out on Friday.

Next week: the details

Events in red are those most likely to shake markets.

During the week

  • China: Foreign trade (Dec). Global trade is weak and Chinese trade activity is trending down. An upside surprise would boost commodities and equity only temporarily—like for a day, or an hour. Exports (%y/y): previous, +4.7; Consensus, +6.0. Imports: previous, –6.7; consensus, –6.2.

Monday 12

  • India: Consumer prices (Dec), industrial production (Nov).
  • USA: Fed speech: Lockhart (FOMC voter). Federal Reserve Bank of Atlanta President Dennis Lockhart­­ speaks on monetary policy at 11:40 (Mexico City time). This year, President Lockhart is a voting member. He’s seen as a dove.

Tuesday 13

  • UK: Consumer prices (Dec).
  • USA: Job Openings and Labor Turnover (JOLT) (Dec). Today’s jobs report confirmed that the U.S. labor market upward momentum continued last month. But it hasn’t yet recovered: neither the underemployment rate, real wages, nor labor turnover have reached to pre–great-Recession levels. The JOLT report includes three indicators in found in Janet Yellen’s dashboard: quits, hires and job openings rates.

Wednesday 14

  • Global: EIA Weekly Petroleum Status Report.
  • Euro Area: Industrial production (Nov).
  • USA: Fed speech: Plosser (FOMC voter), business inventories (Nov), Beige Book. Retail sales (Dec). We’ll be watching for the underlying sales, for it excludes gasoline sales (dropping as prices at the pump fall), and automotive sales and parts (which follow idiosyncratic cycles). Underlying retail sales slowed down to 3.7% y/y in November from 5.2% in October.
  • Mexico: Fixed investment (Oct).

Thursday 15

  • Japan: Bank of Japan speech: Kuroda.
  • Euro Area: Foreign trade (Nov).
  • Turkey: Unemployment rate (Oct).
  • USA: Unemployment claims (Jan 10).

Friday 16

  • Euro Area: Consumer prices (Dec, final).
  • Russia: Foreign trade (Nov).
  • USA: U. Michigan consumer sentiment and inflation expectations (Dec, flash). Consumer prices (Dec). Falling oil prices have been pushing U.S. headline inflation down, while leaving U.S. core inflation stable at around 1.7%. We think that any pass-through of the oil price descent to core inflation would shift out the market view as to when the Fed will first hike rates to a date beyond the current consensus projection of June 2015. Consensus: headline, 0.7% y/y (from 1.3% in Nov); core, no change at 1.7% y/y. Industrial production (Dec). See comments above. Since 2010, the mining sector has been driving U.S. industrial production growth. November’s industrial production report showed the sector already stagnating. Consensus: 0.0% m/m (from 1.3% in Nov).
  • Mexico: Unemployment rate.
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