Macroeconomics: The Day Ahead for 16 November

A busy day for UK and US statistics sees UK labour and wages data ahead of the headlining US Retail Sales, accompanied by Industrial Production, Import Prices, NAHB Housing Market Index and Business Inventories, with CEE and revised Eurozone Q3 GDP readings also on tap. Central bank speakers are once again plentiful, though many will be discussing non-monetary policy topics, while Hungary’s MNB is expected to revert to a faster pace of still gradual rate hikes (above all ‘gradual’ compared to Czechia’s CNB and Poland’s NBP) with a 30 bps hike to 2.1%. Home Depot and Walmart get this week’s slew of major retail corporate earnings under way, with Premier Foods and Vodafone among the highlights in the UK. Govt bond auctions come via way of the UK (25-yr) and Finland (10 & 26-yr). As much as it is painful to say this, but the communications ineptitude being displayed by the BoE apparently knows no bounds, for example: Bailey’s comment that he voted against ending QE early as it would set a precedent for any future QE programmes being terminated early – underlining a) these comments from former BIS chief Caruana in 2015 “”Policy does not lean against the booms, but eases aggressively and persistently during busts. This induces a downward bias in interest rates and an upward bias in debt levels, which in turn makes it hard to raise rates without damaging the economy – a debt trap”, and perhaps also b) the BoE does not really believe it can ever offer forward guidance with any credibility (this is called ‘failure’ and ‘defeatism’). Even worse were his comments on “putting his foot down” on market inflation and rate expectations, with his comments a few weeks ago ‘we will have to take action’… and then of course doing nothing. Clearly taking a leaf out of the boss’ playbook, chief economist Pill then decided to have a pop at the ECB: “The ECB has a tendency to produce an artificial consensus, which is unhealthy in some aspects” – as if the BoE’s MPC performance has been or is anything to shout about.

U.K. – Sep/Oct Unemployment & Wages

– As the aforementioned BoE testimony yesterday hinted strongly, the initial post furlough scheme end labour data showed no material signs of an easing in UK labour demand, with a 160K gain in HMRC Payrolls and a further modest drop in the Claimant count (which given recent trends may prove to be a larger drop in revision), and a further record levle of Vacancies. The latter is somewhat deceptive, given a deeper dive reveals that many of the post are minimum wage low or unskilled positions. Be that as it may, Average Weekly Earnings are gravitating back to more normal levels, with the ONS suggesting the underlying trend rate is around 3.4% y/y, i.e. likely to be confirmed as negative in real terms when tomorrow’s CPI data are published, and thus underlining a squeeze on real incomes. CPI and Friday’s Retail Sales are likely to weigh more heavily in the BoE’s immediate policy deliberations, even if markets will remain sceptical about the MPC’s assessment and consequent policy signalling.

U.S.A. – Oct Retail Sales & Industrial Production, Nov NAHB Housing Index

Retail Sales tops today’s busy run of US statistics, with a modest recovery in Auto Sales and higher gasoline prices seen pacing a headline increase of 1.3% m/m and an ex-Autos gain of 1.0%, while the core ‘control group’ measure forecast to rise 0.9% m/m. But as this is a value not a volume measure, and with last week’s 0.9% m/m headline and 0.6% m/m core rise in CPI still ringing in everyone’s ears, the simple point is that much of these optically strong expected gains will be price rather than demand related. Industrial Production is forecast to bounce back 0.8% m/m after and unexpectedly sharp 1.3% m/m drop in September, on the back of storm and supply chain disruptions, as well a normalization in utilities output. The latter may well be a drag on the October outturn due to warmer than normal temperatures, while anecdotal evidence suggests chip shortages continue to restrain auto assembly rates significantly. The NAHB’s Housing Market Index is also seen unchanged at a very strong 80, with some downside risks given increasing affordability issues.