Global economic data might not pose much more than brief headline risk - BBH

The global economic data in the days ahead might not pose much more than brief headline risk, according to analysts at BBH.  

Key Quotes

“Data from Q4 does not matter much now.  Or perhaps, more to the point, at the start of the of the New Year, investors are especially forward-looking.  The data is important only to the extent they provide some measure the economic and price momentum at the start of 2018.”

“In the US, the decline in gasoline prices in December (~3%) will dampen the headline CPI, while the core needs to rise 0.2% to keep the year-over-year pace steady at 1.7%.  Some of the short-run factors that the Fed cited last year are beginning to fade and this is most evident in the service prices.  At the same time, it will be difficult for December retail sales to match the outsized 0.8% rise in November (headline and "control" or GDP components).  Nevertheless, real consumer spending is running 3% (annualized rate).”

“In this context, it is noteworthy that consumer credit appears to have slowed in 2017 from 2016.  Consider that the monthly average in 2016 was about $19 bln a month.  In the first 10 months of 2017, it averaged about $15.7 bln.  The November report will be released at the start of the week.  If the pace does not pick up, it 2017 could be the slowest pace in the extension of consumer credit in three years.”

“The eurozone reports employment, retail sales, and industrial production.  The unemployment rate is gradually falling.  It peaked at 12.1% in 2013.  It finished 2016 at 9.6% and stood at 8.8% this past November.  It is expected to have eased to 8.7%.  It may finish this year near 8.0%.  Retail sales are expected to fully recover from October's 1.1% fall.  Using averages to smooth out the volatility, we note that in 2016, retail sales rose on average 0.1% a month.  This year through October, they have retained that average.  Industrial production is expected to have risen 0.8% in November, but due to the base effect, the year-over-year pace will slow to 3.0% from 3.7%, which would be the slowest annual pace since June.”

“The UK reports industrial production, construction, and trade.  Industrial output and construction appear to be slowing, while the trade balance improved markedly in 2017.  The shortfall ran a little more than GBP3 bln a month in 2016 and 2017, through October, averaged a little less than GBP2.2 bln a month.  Separately, political issues return.  There is speculation of a cabinet reshuffle.  Sterling will likely be sensitive to the perceived outcome in terms of hard or soft Brexit (with the latter seen as more supportive).”

“The markets are typically not particularly sensitive to Japan's high frequency data, but the labor cash earnings at the start of the week may be interesting.  Even though the headline may be unchanged at 0.6% in November, inflation is again rising faster.  This results in real cash earnings likely falling again after rising slightly in the year to October.”