Key Events This Week: Central Banks Galore, Retail Sales In Store, PMIs And PPIs

December 13, 2021 No Comments Markets

In the last busy week of the year, which sees no less than 20 central bank announcements, the Fed’s decision on Wednesday will be the focal point of the week. In terms of what to expect, DB’s Jim Reid writes that the bank’s US economists anticipate a doubling in the pace of tapering, which would bring the monthly drawdown of Treasury and MBS to $20bn and $10bn per month respectively (this is in line with what both Goldman and Morgan Stanley expect). That would see the process of tapering conclude in March, giving them greater optionality for an earlier liftoff. Bear in mind that this meeting will also see the release of the latest dot plot, as well as the projections for inflation, growth and unemployment. On that, DB economists see the median dot in 2022 likely showing two rate hikes, with risks of more, up from September when only half the dots saw any hikes by the end of 2022.

The ECB’s decision will then follow on Thursday, with economists noting that until the arrival of the Omicron variant, the ECB appeared on track to initiate a transition to a monetary policy stance based more on policy rates and rates guidance and less on liquidity provision. They were also set to create a policy framework with more optionality to better respond to inflation uncertainties. However, the Omicron variant reinforces the need for optionality, and until there’s greater clarity on what it means for the pandemic and the recovery, the ECB may stall the expected decisions in part or in whole until early 2022. As with the Fed, it’ll be interesting to see the December staff forecasts on inflation, which could influence the market view on lift-off timing.

The Bank of England’s decision will also take place on Thursday, and many – but not all – economists expect the MPC to raise Bank Rate by +15bps to 0.25%. DB is one of those arguing for a hike, noting that news of the Omicron variant has changed little on the medium-term economic outlook, with the labor market remaining as tight as it has been in recent memory, and inflation continuing to outpace staff forecasts. Nevertheless, the risks to this view are finely balanced, and risk management considerations may lead them to delay a rate hike again, as they instead opt to find out more information on Omicron’s impact.

Finally on the central bank front, the Bank of Japan will be holding their final monetary policy meeting of the year on Friday. Here, although there had been an expectation that the bank would revise their special pandemic corporate financing support program at this meeting, the emergence of the Omicron variant has changed the situation. Given the next meeting is only a month later, the view is now that they’ll maintain a wait-and-see stance in this meeting and adjust the policy in January, although a revision remains possible this week if more positive evidence is found on the new variant.

Moving on to the data, the main highlight will be the flash PMIs for December from around the world on Thursday which will offer an initial indication as to whether there’s been any economic reaction yet to rise in restrictions and the emergence of the Omicron variant. There’ll also be an increasing amount of hard data out of the US for November, including retail sales (Wednesday), industrial production, housing starts and building permits (all Thursday). In China, Wednesday will see the usual data dump release of retail sales and industrial production data for November, and in Germany on Friday there’s the Ifo’s business climate indicator for December. Finally on the inflation side, releases will include the US PPI data for November tomorrow, along with the UK and Canadian CPI readings for November on Wednesday.

Looking at the coming days, expect more geopolitical rumblings from the Russia-Ukraine border: Presidents Biden and Putin held a phone call to discuss tensions following the build-up of Russian forces on the Ukrainian border. The readouts following the call offered few details but signalled both sides would follow up. President Biden has cautioned severe economic sanctions would be levied should Russia invade Ukraine, including sanctions on Putin’s inner circle, energy companies, and banks. The US would also consider severing Russian access to the US-run international payments system, SWIFT.

Courtesy of DB, here is a day-by-day calendar of events

Monday December 13

Central Banks: ECB’s Centeno speaks, BoE release Financial Stability Report

Tuesday December 14

Data: UK October unemployment, Euro Area October industrial production, US November NFIB small business optimism index, PPI

Wednesday December 15

Data: China November retail sales, industrial production, UK November CPI, US November retail sales, December Empire state manufacturing survey, NAHB housing market index
Central Banks: Federal Reserve monetary policy decision, Bank of Canada governor Macklem speaks

Thursday December 16

Data: December flash PMIs from Japan, France, Germany, Euro Area, UK and US, Euro Area October trade balance, US weekly initial jobless claims, November housing starts, building permits, industrial production, capacity utilisation, December Philadelphia Fed business outlook, Kansas City Fed manufacturing index
Central Banks: Monetary policy decisions from the ECB, Bank of England, Bank Indonesia, Central Bank of Turkey and Bank of Mexico
Politics: EU leaders meet for European Council

Friday December 17

Data: UK December GfK consumer confidence, November retail sales, Germany November PPI, December Ifo business climate indicator, Euro Area final November CPI
Central Banks: Monetary policy decisions from the Bank of Japan and the Central Bank of Russia, ECB’s Rehn speaks

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Finally, looking at just the US, Goldman writes that the key economic data releases this week are the PPI report on Tuesday, the retail sales report on Wednesday, and the Philadelphia Fed manufacturing index on Thursday. The December FOMC meeting is this week, with the release of the statement at 2:00 PM ET on Wednesday, followed by Chair Powell’s press conference at 2:30 PM.

Monday, December 13

There are no major economic data releases scheduled.

Tuesday, December 14

06:00 AM NFIB small business optimism, November (consensus 98.4, last 98.2)
08:30 AM PPI final demand, November (GS +0.6%, consensus +0.5%, last +0.6%); PPI ex-food and energy, November (GS +0.5%, consensus +0.4%, last +0.4%); PPI ex-food, energy, and trade, November (GS +0.5%, consensus +0.4%, last +0.4%): We estimate a 0.5% increase for PPI ex-food and energy and PPI ex-food and energy, and trade, reflecting a continued boost from supply chain bottlenecks, labor shortages, and commodity prices. We estimate that headline PPI increased by 0.6% in November.

Wednesday, December 15

08:30 AM Empire State manufacturing survey, December (consensus +25.0, last +30.9)
08:30 AM Retail sales, November (GS +0.4%, consensus +0.8%, last +1.7%): Retail sales ex-auto, November (GS +0.4%, consensus +0.9%, last +1.7%); Retail sales ex-auto & gas, November (GS +0.3%, consensus +0.8%, last +1.4%); Core retail sales, November (GS +0.3%, consensus +0.8%, last +1.6%): We estimate a 0.3% increase in core retail sales (ex-autos, gasoline, and building materials) in November (mom sa). The elevated level of retail sales—at +12.9% year-on-year in October—implies a high hurdle for incremental growth during the holiday season. Additionally, the pace of ecommerce purchasing slowed during Black Friday weekend, according to Adobe’s large panel of online retailers. Brick and mortar trends were more encouraging however, and in this week’s report, we expect firm gains in mall-based categories to partially offset a sequential decline in non-store sales. We estimate a 0.4% increase in headline retail sales, reflecting flat-to-down auto sales but higher auto and gas prices.
08:30 AM Import price index, November (consensus +0.7%, last +1.2%)
10:00 AM Business inventories, October (consensus +1.1%, last +0.7%)
10:00 AM NAHB housing market index, December (consensus 84, last 83)
02:00 PM FOMC statement, December 14-15 meeting: As discussed in our FOMC preview, we expect that the FOMC will double the pace of tapering to $30bn per month at its December meeting next week, putting it on track to announce the last two tapers at the January FOMC meeting and to implement the last taper in March. We now expect the FOMC to deliver rate hikes next year in May, July, and November (vs. June, September, and December previously).

Thursday, December 16

08:30 AM Initial jobless claims, week ended December 11 (GS 222k, consensus 195k, last 184k); Continuing jobless claims, week ended December 4 (consensus 1,938k, last 1,992k): We estimate initial jobless claims increased to 222k in the week ended December 11.
08:30 AM Housing starts, November (GS +2.5%, consensus +3.0%, last -0.7%); Building permits, November (consensus +0.4%, last +4.2%): We estimate housing starts increased by 2.5% in November, reflecting higher permits in October.
08:30 AM Philadelphia Fed manufacturing index, December (GS 32.0, consensus 29.6, last 39.0): We estimate that the Philadelphia Fed manufacturing index declined by 7.0pt to 32.0 in December, partly reflecting reversion following an outsize jump in the prior month.
09:15 AM Industrial production, November (GS +0.5%, consensus +0.7%, last +1.6%): Manufacturing production, November (GS +0.7%, consensus +0.7%, last +1.2%)
Capacity utilization, November (GS 76.7%, consensus 76.8%, last 76.4%): We estimate industrial production rose by 0.5% in November, with strong mining production offsetting weaker oil and gas production. We estimate capacity utilization rose by 0.3pp to 76.7%.
09:45 AM Markit Flash US manufacturing PMI, December preliminary (consensus 58.5, last 58.3); Markit Flash US services PMI, December preliminary (consensus 58.7, last 58.0)
11:00 AM Kansas City Fed manufacturing index, December (consensus 25, last 24)