It’s a busy week for Fed watchers many of whom are expecting more details on whether the US central bank will pull back on its plan for 3 rate hikes in the coming year. Fed Chair Powell’s speech at the Economic Club of New York on Wednesday evening will likely be closely watched in light of what has been greater discussion in recent weeks from officials on downside risks to the outlook and softer inflation. In addition to that, Vice-Chair Clarida speaks tomorrow and will also be closely watched in light of his dovish remarks 10 days which seemed to signal a notable repricing of Fed expectations.
Oon Thursday we’ll also get the FOMC minutes from the November 7th-8th meeting . The meeting failed to throw up any surprises and only included minimal changes to the FOMC statement, however we should learn more about the Committee’s discussion of its operating framework, potential for another technical adjustment to the interest rate on excess reserves (IOER), views about recent market volatility and the potential effects of changes in trade policy.
Meanwhile, the G20 meeting on Friday and Saturday looms over us and headlines will start as leaders start to gather in Buenos Aires from today onwards. The G20 overall is a sideshow to the sideline meeting between US President Trump and Chinese President Xi Jingping to discuss trade. Recent comments (per Bloomberg) from White House economic advisor Kudlow have been mixed, however Kudlow has said that Trump is trying to “inject a note of optimism into trade talks with China” while Trump himself has been reported as saying that “China wants to have a deal”, suggesting that the President has been siding with the more pro-free trade advisers in the White House recently. Since then, the news that China hawk Navarro will not be attending the meeting also lends some support to the view of possible progress at the meeting. That being said, it’s still extremely difficult to predict the outcome but expect plenty of headlines and hints through this week.
As Deutsche Bank notes, the data highlights in the US next week include the October PCE inflation report and second reading of Q3 GDP. For the former, the consensus is for a +0.2% mom core reading, however base effects are expected to push the annual reading down one-tenth to +1.9% yoy and therefore below the Fed’s target again. Sellside economists have noted that the healthcare component of the PPI, which fell in October and which helps determine the corresponding component in the PCE price index, has been revised up meaningfully in October during the past two years. This finding suggests there may not be as much downside to core PCE inflation. For Q3 GDP, the market is expecting a small upward revision of one-tenth to +3.6% qoq saar with downward revisions to retail sales offset by a modest upward revision to construction activity
As for other data due in the US next week, we’ll get more housing data on Tuesday which has started to come under the spotlight again, with the FHFA house price, Q3 house price purchase and S&P CoreLogic house price indices all due. We’ll also get October new home sales on Wednesday and October pending home sales on Thursday. The November consumer confidence print on Tuesday, October advance goods trade balance on Wednesday, and various regional manufacturing reports during the week are the other highlights.
In Europe, the highlights are likely to be the preliminary November CPI reports with data due in Germany and Spain on Thursday, and France, Italy and the broader Euro Area on Friday. In China we’ll get the official November PMIs on Friday while in Japan we get the manufacturing PMI on Monday.
Over at the ECB, President Draghi is scheduled to make comments on Monday when he addresses the European Parliament’s committee for economic and monetary affairs, and then at an event in Frankfurt on Thursday. ECB officials Praet, Coeure and Nowotny will also speak on Monday, before Nouy and Costa speak on Wednesday. Over at the BoE, Governor Carney speaks at an event on Monday. The BoJ’s Masai will also speak on Thursday.
Other potentially interesting events worth noting next week include Chinese Vice-Premier Liu He addressing a Germany-China investment and trade forum on Monday, the BoE’s Financial Stability Report and stress test results on Wednesday, BoE presenting its independent assessment of Brexit’s impact on the financial system and UK economy to the Treasury Committee on Thursday, and a 5 and 10-year BTP auction on Thursday which is likely to face renewed pressure in light of disappointing retail investor demand at recent auctions. Finally the G-20 Summit may also include the US, Mexico and Canada signing their new trade agreement.
Below is a breakdown of key events by day courtesy of Deutsche Bank:
- Monday: It’s a fairly quiet start to the week for data on Monday. Overnight, we’ll get Japan’s preliminary November manufacturing PMI. In Europe, we get Germany’s November IFO survey, while in the US, we get the Chicago Fed’s October National activity index and the Dallas Fed’s November manufacturing activity index. Away from the data, it’s a busy day for central bank speak, with the ECB’s Draghi, Praet, Nowotny and Coeure all speaking at different times along with the BoE’s Carney and former Fed Governor Greenspan.
- Tuesday: Overnight on Tuesday, we get China’s October industrial profits data. In Europe, we get France’s November consumer confidence reading and the UK’s November CBI retail sales release. In the US, we get the September FHFA house price index, Q3 house price purchase index and September S&P CoreLogic index in addition to the November consumer confidence print. There’s also more central bank speak with the Fed’s Clardia, Bostic, Evans and George all due to speak along with the ECB’s Nouy and Costa. Chinese Vice Premier Liu He is also due to address a Germany-China investment and trade forum.
- Wednesday: The main highlights on Wednesday are Fed Chair Powell’s speech at the Economic Club of New York, and the second reading of Q3 GDP in the US. Prior to this we get the UK’s November BRC shop price index reading followed by the BoE’s financial stability report and stress test results. Following that, we get Euro Area October M3 money supply and Germany’s December GfK consumer confidence release. In the US, we get the latest weekly MBA mortgage applications, October advance goods trade balance, preliminary October wholesale inventories, October retail inventories, October new home sales and Richmond Fed’s November manufacturing index.
- Thursday: It’s a busy day for data on Thursday with the key highlights being the release of the October PCE report and latest FOMC minutes in the US, and preliminary November CPI releases for Germany and Spain. Elsewhere, we’ll get France’s preliminary Q3 GDP report, November unemployment in Germany, UK’s November money and credit aggregates data, and Euro Area’s November confidence indicators. In the US, we get October personal income and real personal spending data along with the latest weekly initial jobless and continuing claims data, and October pending home sales. Away from that, ECB President Draghi and the Fed’s Evans and Mester are due to speak. The Bank of England will also make its independent assessment of Brexit’s impact on the financial system and broader UK economy to the Treasury Committee.
- Friday: All eyes will be on the G-20 Summit on Friday which continues into the weekend. Away from this, the main data highlight is the preliminary November CPI report for the Euro Area. Prior to this, overnight we get China’s November official PMIs and UK’s November GfK consumer confidence data. We’ll also get France’s October PPI and preliminary November CPI along with Italy’s preliminary November CPI and final Q3 GDP, and Euro Area’s October unemployment report. In the US, the only data due is the November Chicago PMI. The Fed’s Williams is also due to speak.
Finally, looking at just the US, Goldman notes that the key economic data releases this week are the second estimate of Q3 GDP growth on Wednesday and core PCE on Thursday. In addition, minutes from the November FOMC meeting will be released on Thursday. There are several scheduled speaking engagements by Fed officials this week, including one by Chairman Powell on Wednesday.
Monday, November 26
- 10:30 AM Dallas Fed Manufacturing index, November (consensus +24.5, last +29.4)
Tuesday, November 27
- 07:45 AM Fed Vice Chairman Clarida (FOMC voter) speaks; Fed Vice Chairman Richard Clarida will speak at the Clearing House 2018 annual conference in New York.
- 09:00 AM FHFA house price index, September (consensus +0.4%, last +0.3%); 09:00 AM S&P/Case-Shiller 20-city home price index, September (GS +0.3%, consensus +0.2%, last +0.1%): We expect the S&P/Case-Shiller 20-city home price index increased 0.3% in September, following a 0.1% increase in August. Our forecast of a relatively stronger increase mostly reflects modest appreciation in other home prices indices such as the CoreLogic house price index.
- 10:00 AM Conference Board consumer confidence, November (GS 134.9, consensus 135.8, last 137.9): We estimate that the Conference Board consumer confidence index moved down to 134.9 from 137.9, partially reflecting weakness in the stock market.
- 2:30 PM Kansas City Fed President George (FOMC non-voter), Atlanta Fed President Bostic (FOMC voter), and Chicago Fed President Fed Evans (FOMC non-voter) speak: Kansas City Fed President Esther George, Atlanta Fed President Raphael Bostic, and Chicago Fed President Charles Evans will discuss the economy, regulation, and the future of payments on a panel at the Clearing House 2018 conference in New York.
Wednesday, November 28
- 08:30 AM U.S. Census Bureau Report on Advance Economic Indicators; Advance goods trade balance, October (GS -$77.0bn, consensus -$77.0bn, last -$76.3bn); Wholesale inventories, October preliminary (consensus +0.4%, last +0.4%): We estimate that the trade deficit increased to $77.0bn in October, reflecting a jump in inbound container traffic ahead of the holiday shopping season.
- 08:30 AM GDP (second), Q3 (GS +3.6%, consensus +3.6%, last +3.5%); Personal consumption, Q3 (GS +3.9%, consensus +3.7%, last +4.0%): We look for Q3 GDP to be revised up by one tenth to +3.6% in the second vintage of Q3 GDP, reflecting potential upward revisions to inventory and fixed investment, with a potential offset by downward revisions to personal consumption growth.
- 10:00 AM New home sales, October (GS +4.4%, consensus +4.0%, last -5.5%): We estimate new home sales to rebound by 4.4% in October, following a 5.5% decline in the prior month. We expect the effects of Hurricane Michael to potentially weigh on new home sales. Single family starts increased slightly in October, while mortgage applications declined.
- 10:00 AM Richmond Fed Manufacturing Index, November (consensus +16, last +15)12:00 PM Fed Chairman Powell (FOMC voter) speaks: Fed Chairman Jerome Powell will speak on the Fed’s framework for monitoring financial stability to the Economic Club of New York.
Thursday, November 29
- 08:30 AM Personal income, October (GS +0.5%, consensus +0.4%, last +0.2%); Personal spending, October (GS +0.5%, consensus +0.4%, last +0.4%); PCE price index, October (GS +0.22%, consensus +0.2%, last +0.12%); Core PCE price index, October (GS +0.12%, consensus +0.2%, last +0.15%); PCE price index (yoy), October (GS +2.04%, consensus +2.1%, last +1.99%); Core PCE price index (yoy), October (GS +1.82%, consensus +1.9%, last +1.97%): Based on details in the PPI, CPI and import price reports, we forecast that the core PCE price index rose 0.12% month-over-month in October, or 1.82% from a year ago. Additionally, we expect that the headline PCE price index increased 0.22% in October, or 2.04% from a year earlier. We expect a 0.5% increase in October personal income and a 0.5% gain in personal spending.
- 08:30 AM Initial jobless claims, week ended November 24 (GS 220k, consensus 220k, last 224k); Continuing jobless claims, week ended November 17 (last 1,668k): We estimate jobless claims edged down by 4k to 220k in the week ended November 24, following a 3k increase in the prior week.
- 10:00 AM Pending home sales, October (GS +0.3%, consensus +0.5%, last +0.5%); We estimate that pending home sales increased by 0.3% in October, following a 0.5% increase in September, due to weaker regional home sales data so far in October. We have found pending home sales to be a useful leading indicator of existing home sales with a one- to two-month lag.
- 2:00 PM Minutes from the November 7–8 FOMC meeting: At its November meeting, the FOMC left the funds rate target unchanged, as widely expected. The changes to the post-meeting statement were minimal, with the statement continuing to describe economic activity and job gains as “strong” but acknowledging the moderation in business fixed investment from its “rapid” pace earlier in the year. In the minutes, we will look for further discussion of financial markets and the stock market selloff, which were not directly mentioned in the statement.
Friday, November 30
- 09:45 AM Chicago PMI, November (GS 58.4, consensus 58.5, last 58.4): We estimate that the Chicago PMI remained unchanged at 58.4 in November. The continued slowdown in global manufacturing may weigh on business sentiment in this report.
Source: Deutsche Bank, Barclays, Goldman
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