Editor: Felix Ewert The Week Ahead Key Events 27 Nov 3 Dec, 2017
Monday 27, 08.00 Swedish CFO Survey and Index The Swedish CFO index rose to 58.2 in the spring which was the highest level since May 2011. Since then Swedish growth Q2 has come out far better than expected and SEB has updated forecasts for Swedish as well as world growth. It will therefore be interesting to see if this optimism is also reflected by the CFOs in the survey. Even if they were increasingly optimistic in the spring survey there was a lack of investment plans as focus still was on more defensive strategies. Thus it will also be interesting to see if a possible continued optimism now has spilled over in a more expansive agenda for the corporates. CFO Index Prev. Swedish 58.2 WHAT ARE THE CFO SURVEYS Bi-annual surveys with the largest Swedish and Norwegian companies which has been conducted since 2006 respective 2010. The CFO Indices are weighted indices of the answers to four core questions designed to capture the current sentiment among CFOs where anything above 50 indicates positive sentiment. There are also sub-indices based on the four core questions: 1. Business conditions 2. Financial position 3. Lending willingness 4. Counterparty default risk Besides the core questions CFOs are also asked to rank priorities the coming months, rate concerns, views on number of employees, attractiveness of different sources of financing and much more. Results on an aggregated level as well as by industry/sector which enables more detailed analysis.
Monday 27, 09.30 SWE: Household lending (Oct) % yoy SEB Cons. Prev. Household lending 7.0 --- 7.1 Non financial corporations --- --- 3.8 Household lending slowed slightly after the new amortisation regulation was introduced in June last year, but has been stabilised so far this year. The weaker housing market implies that lending growth will edge lower, although an increasing number of completed residential constructions will work in the opposite direction. Amortisation rates have increased due to new regulation and higher requirements from banks. This in combination with slowing house prices in 2018 will likely add to downward pressure in household lending.
Monday 27, 16.00 US: New home sales (Oct) % yoy SEB Cons. Prev. New home sales 635k 624k 667k m/m% -4.8% -6.5% 18.9% New home sales unexpectedly rose sharply in September and the number of sales increased by close to 19% compared to the previous month. At 667k sales reached the highest level since 2007. The strong outcome followed two consecutive months of declines and probably reflects an increase in the number of properties in which construction has not yet started. September sales were particularly strong in the South region, reflecting increased demand following the hurricanes. The NAHB housing market index continued to rise in November, indicating that worries about the hurricane impact have abated. Continuing labour market tightening and low mortgage costs will support housing demand going forward but data is expected to be even more volatile than usual due to the impact of the hurricanes. The strong outcome in September was likely reversed in October and we forecast that new home sales decreased to 635k.
Tuesday 28, 09.30 SWE: Trade balance (Oct) SEK bn SEB Cons. Prev. Actual 0.5 --- 2.6 The trade balance has stabilised over the last 12 months after trending lower since 2006. Stronger exports indicate that the trade balance will improve slightly going forward. Exports have accelerated in 2017 and the sentiment indicators imply further improvements going forward.
Tuesday 28, 09.30 SWE: Retail sales (Oct) % mom/yoy SEB Cons. Prev. Retail sales -0.3/3.0 0.1/3.3 0.8/4.6 We expect retail sales to edge lower in October after being strong in Q3. Retail sentiment has improved slightly during the last 3-4 months, after declining markedly during 2016. Level is still low, indicating a modest recovery for sales. Other parts of household consumption are growing relatively faster than retail sales. Still, total consumption has continued to be on the weak side compared to our forecast. However, the third quarter looks a bit stronger with household consumption increasing by slightly more than 2.5% y/y.
Tuesday 28, 10.00 EMU: Money supply M3 (Oct) Germany SEB Cons. Previous M3, % y/y sa 4.9 5.1 5.1 credit to EZ residents 4.1 n/a 4.2 credit to private sector 2.3 n/a 2.5 Growth of money supply M3 has fluctuated in a range between 4.4 and 5.3% y/y for 30 months. Having dropped towards the lower bound in July it rebounded to the upper part of the range in Aug/Sep aggregate loan dynamics ( credit to EZ citizens ) continue to trace M3 growth (Sep: 4.2%) - driven yet again by strong (albeit decelerating) growth of Credit to General Government. The drop to 7.7% in July (22m low) was since reversed (Sep: 8.4% y/y) but will likely continue towards year-end. Credit to the private sector rose 2.5% y/y in Sep - i.e. half the speed of overall M3 growth, the reason being that the credit channel remains partially blocked as banks struggle with NPL reduction and/or sluggish credit demand. We expect this gap to gradually narrow in the coming months.
Tuesday 28, 16.00 US: Conference Board Consumer Conf. (Nov) SEB Cons. Prev. Headline 124.4 123.5 125.9 The Conference Board index beat expectations in October and rose to a near 17-year high. The improvement in consumer confidence was driven by solid gains in both the present situation and future expectations indices. The share of respondents who say jobs are plentiful rose to the highest level since 2001, suggesting that the labour market improvement continues. The adverse impact of the hurricanes has passed and consumer confidence will continue to be supported by the tight labour market, rising equity indices and low gasoline prices. However, the Conference Board index is at a very high level, suggesting that there is little upside remaining. The University of Michigan consumer sentiment survey fell in November and this indicator is normally highly correlated with the Conference Board survey. The drop was from the highest level since 2004, however. Our forecast is that the Conference Board index weakened a bit to 124.4 in November. Going forward, the Conference Board and other surveys indicate that consumption should continue to grow at a healthy pace over the coming quarters.
Wednesday 29, 09.00 SWE: Consumer confidence (Nov) SEB Cons. Prev. CCI 105.0 103.3 105.3 Inflation expectations 2.6 --- 2.8 Consumer confidence has been largely stable at the end of last year. Sentiment regarding the general economic situation is still at moderate levels, considering the strong Swedish growth and labour market. We continue to predict the sentiment to improve. Increased uncertainty about the housing market is a downside risk. SEB Housing Price indicator declined markedly in November, but the historically strong correlation seems to have been reduced significantly over the last 3-4 years. Indicators for the household sector will be extremely important to determine if the weaker house prices is leading to a set back for private consumption.
Wednesday 29, 09.00 SWE: Business confidence (Nov) SEB Cons. Prev. Manufacturing 120.5 --- 121.1 Business sector 109.0 --- 109.9 Tendency indicator 112.5 --- 113.3 Manufacturing confidence increased to a new all time high in September and declined only marginally in October. Improving PMI in the Euro-zone and to some extent a weaker krona suggests that momentum in the manufacturing sector will continue to be strong. Still, a small decline from the currently very high level for confidence is probable. The slowdown in the housing market means that confidence in construction will be more important than usual. Confidence remained high in October, but a decline seems probable in November. Sentiments in the service and the retail sector are above the historical averages, but relatively far from cyclical highs. Our expectations that service sentiment will improve have so far been dashed, but with service PMI increasing to the highest levels since 2011 in September and October implies that sentiment will rise in November.
Wednesday 29, 09.30 SWE: GDP (Q3) %, qoq/yoy SEB Cons. Prev. GDP 1.3/4.0 0.8/3.5 1.3/3.1 GDP is expected to continue to have grown strong in Q3 to 1.3%, 4.0% y/y (Riksbank 1.0%, 3.4% y/y). Production has been extremely strong in Q3 indicating GDP growth at almost 5% y/y. Expenditure side data also looks reasonably strong, but was usual with little information for important components such as service trade, fixed investments and public consumption accounting for almost 50% of final demand Both labour market data and sentiment indicators supports the conclusion that growth in Q3 SWE: GDP, % y/y SEB forecast Actual 2017Q3P 2017Q2 Private consumption 2.5 2.2 Public consumption 1.3-1.9 Fixed investments 7.0 6.4 Exports 3.3 2.7 Goods 3.0 3.7 Services 4.0 0.4 Imports 2.6 3.1 Goods 2.0 2.2 Services 4.0 5.3 Inventories (contribution to GDP) -0.1-0.4 GDP 3.5 1.6 GDP working day adjusted 4.0 3.1 Employment 2.6 2.3
Wednesday 29, 11.00 EMU: ESI (Nov) SEB Cons. Prev. Economic confidence 115.0 114.5 114.0 Business climate indicator 1.55 1.51 1.44 Industrial confidence 8.8 8.6 7.9 Service confidence 16.9 16.7 16.2 Confidence continue to be strong. Composite PMI rose in Nov to the highest level since April. The manufacturing sector is especially strong and reached the second highest level ever (only marginally below the highest print) ESI was in Oct at a high level and all 4 major economies are now showing similar strength. Looking at sectors, there is a broad based improvement in the EMU both in indicators and hard data. Production expectations for the months ahead are high in industry and companies are also happy with their order books.
Wednesday 29, 14.00 GER: CPI (Nov, P) % mm / % yy SEB Cons. Prev. CPI +0.2/1.7 +0.3/1.7 Unch./1.6 HICP +0.1/1.6 +0.2/1.7-0.1/1.5 German preliminary CPI data provide a last-minute indication for EZ inflation (for which the flash estimate will is published one day later). Six German Länder report CPI data from 9.00 am until midday. The pan-german inflation print is published at 2:00 pm as a population-weighted average of these six regional readings seasonality is slightly positive in Nov but base effects should keep the annual rate unchanged vs. October s 1.6% Despite higher oil prices in Nov (Brent in euro +9% vs. Oct) fuel prices rose only moderately (gasoline +0.2%, heating oil +2.9% m/m). Further upward pressure on the CPI should result from food and package tour prices - assuming these rose in line with their seasonal pattern. CPI inflation (percent y-o-y) weight (percent) Oct 17 Sep-17 Aug-17 Jul-17 Baden Wurttemberg 20 1.5 1.9 1.9 1.7 Bavaria 24 1.5 1.8 1.8 1.6 Brandenburg 5 1.3 1.6 1.8 1.4 Hesse 12 1.6 2.1 1.8 1.9 NRW 33 1.6 1.9 1.9 1.8 Saxony 8 1.8 2.0 1.9 1.7 Germany 100 1.6 1.8 1.8 1.7
Thursday 30, 08.00 NOR: Retail sales (Oct) % mm/yy change SEB Cons. Prev. Retail sales exc. autos (volume) 0.7/1.4 0.7/--- -0.8/1.5 Retail sales printed a second consecutive downside surprise in September. Recent weakness in the data is primarily a reaction to very strong levels in Q2. The broader indicator of goods consumption (feeds directly into the National Accounts) held up better than retail sales. This was confirmed in the Q3 GDP report (+0.4% for goods consumption), a positive surprise given the strong rise in Q2. Private consumption has been strong in 2017, and the positive trend continued in Q3. Economists have expressed fear that falling home prices may impact negatively on consumer spending ahead, but this has yet to materialize. Consumption continues to be supported by strong fundamentals, most importantly recovering employment and real disposable income. We expect sales to rebound in October. The upturn in goods consumption should, however, be more modest due to lower spending on electricity (after two strong months) and declining private registered auto sales.
Thursday 30, 10.00 NOR: Norges Bank daily FX purchases (Dec) NOK mn SEB Cons. Prev. Daily FX purchases -650-650 -650 Against our expectations NB reduced daily NOK purchases to NOK 650mn from 850mn. Generally NB tends to hold purchases as stable as possible over time. This suggests that daily purchases will be NOK 650mn in December. Remember purchases usually ends by mid-december as liquidity dries up. According to the budget projection for 2018 the non-oil budget deficit this year didn t grow as much as previously expected. It is now projected to roughly NOK 220bn this year. (NOK 208bn in 2016). However, next year it is expected to grow to NOK 255bn as government expenditures increase. Nevertheless, our estimates suggest that daily NOK-purchases will remain roughly the same in 2018 as this year (NOK 750mn). Just to be clear, the NOK-positive flow (NOK 255bn) is still in the market but more of it is simply handled by oil exporters instead of NB.
Thursday 30, 11.00 EMU: HICP, flash (Nov) %, yoy SEB Cons. Prev. Headline 1.4 1.6 1.4 Core 1.0 1.0 0.9 The small tendencies for higher inflation during the summer have been reversed over the last two months with core back in the sideways trend that was established in the beginning of 2015. Despite stronger growth we see a high probability that the sideways trend will continue also next year. Wage inflation is showing signs of picking up slightly from low levels, but a stronger exchange rate is predicted to offset slightly higher service inflation over the next 12 months. The inflation rate has picked up slightly in the GIIPS countries which means that downside risks have been reduced, but there on the other hand no signs of higher inflation in the core countries, not even in Germany. Headline inflation is predicted to fall back in the beginning of next year, driven by base effects from food and energy. Lower prices on food commodities is a downside risk for headline CPI in 2018.
Thursday 30, 11.00 EMU: Unemployment (Oct) % SEB Cons. Prev. Unemployment 8.9 8.9 8.9 Unemployment has fallen by 1pp in the last year and the positive trend with rising employment and falling unemployment continues. Unemployment has in the last years fallen by 0.1pp every 1-2 months. It fell I Sept and is expected to take a pause in Oct. Growth and labour market indicators are strong supporting a continued positive labour market trend. Employment is rising at a steady pace. Wage pressure is still low but is expected to rise gradually ahead especially in countries where resource utilization is high
Friday 1, 08.30 SWE: PMI Manufacturing (Nov) Index SEB Cons. Prev. PMI 61.0 --- 59.3 Manufacturing PMI has been volatile over the last 4-5 months with a unexpected decline in October. Strong PMI:s in Germany and the Euro-zone and NIER manufacturing sentiment both suggest that the decline will be temporary and we predict an increase above 60 this month. The strong PMI is increasingly being reflected in accelerating industrial production and exports.
Friday 1, 09.00 NOR: Manufacturing PMI (Nov) Index SEB Cons. Prev. PMI 55.0 55.0 54.5 Manufacturing PMI rebounded strongly in October, following two months of negative surprises. The rebound was underpinned by stronger new orders (55.1) and production expectations (56.4). Employment expectations remained unchanged (52). Both the PMI index and the more reliable Business Tendency Survey suggest actual production will continue to recover in coming quarters. Sentiment among business leaders has improved since end-2016. Sentiment in the euro zone is still steaming hot, with the EMU Flash PMI for October increasing further. German manufacturing PMI improved the most, rising 2 units to 62.5. This suggests an uptick in Norwegian manufacturing PMI. Note that Norwegian PMI is very volatility on a month-to-month basis, as it is highly sensitive to changes in the response rate. Hence, we tend to overlook large monthly surprises. We forecast manufacturing PMI to rise to 55.0.
Friday 1, 10.00 NOR: Registered unemployment (Nov) % SEB Cons. Prev. Registered jobless rate (unadjusted) 2.4 2.4 2.4 Both the unadjusted and seasonally adjusted unemployment rates trended lower in October. The data was strong considering the large monthly decline in the number of unemployed persons and lower-than-expected jobless rate. Lower unemployment in the oil-related counties on the west coast continued to accelerate in October and is currently driven the downward trend in the overall number of people registered as unemployed. We expect the unadjusted jobless rate to be stable at 2.4% in November. On our calculations, this implies an unchanged level of 2.5% in the seasonally adjusted rate (3.2% incl. labour market schemes). Norges Bank forecasts a seasonally adjusted rate of 2.6%. The forecast is currently lagging the monthly data. The central bank has emphasized that capacity utilization is rising faster than expected and is likely going to use the strong unemployment data to argue that they can overlook soft inflation in the near term.
Friday 1, 09.30 SWE: Current account balance (Q3) SEK bn SEB Cons. Prev. Q3 --- --- 39.5 Strong imports have made the current account surplus as share of GDP to trend gradually lower after the financial crisis. Still, the surplus remains at high levels. The trade surplus has been largely stable with a gradually declining surplus for goods being offset by a larger surplus for services. In a recent report IMF highlighted very high household saving as an important reason for why the current account continues to show a large surplus, despite high fixed investments.
Friday 1, 10.30 UK: PMI manufacturing (Nov) SEB Cons. Prev. Manufact. PMI 57.0 56.5 56.3 PMI in the manufacturing sector remains close to historically high levels probably supported by a weak currency and strong demand from the euro zone. Although growth in the UK has slowed significantly compared to last year (0.4% q/q in Q3) this is mostly related to weak household spending. A weak GBP should continue to bolster overseas demand for manufactured goods. Moreover PMIs in Germany and France remain at multi years high and improved further in Nov, which is usually supportive for UK PMI. Most likely PMI will continue higher this month. Our simple model suggests that PMI should increase to record highs following the strong sentiment in the euro zone. We are a little cautious and expect 57.0, but risks are tilted to the high side.
Friday 1, 16.00 US: ISM manufacturing (Nov) SEB Cons. Prev. ISM man. 57.5 58.3 58.7 The ISM manufacturing index fell in October after having reached a 13-year high in the previous month. The employment component weakened a tad compared to September but is still at a high level suggesting that the manufacturing sector should make a substantial contribution to employment. The forwardlooking new orders index dropped to 63.4. The manufacturing sector is supported by the weaker dollar and strong global demand and any adverse impact from the hurricanes have passed by now. Prospects for the sector remain bright. The Fed s regional manufacturing surveys suggest that activity in the manufacturing sector slowed down in November. Our prediction model indicates a slight fall for the ISM manufacturing index in November. We forecast that the ISM manufacturing index weakened to 57.5 in November.
European Sovereign Rating Reviews Upcoming rating reviews Friday, 24 Nov 2017 Agency Rating / Outlook last change Change? Estonia Moody's A1 / Stable 03/31/2010 positive outlook? Friday, 01 Dec 2017 Agency Rating / Outlook last change Change? Belgium Fitch AA- / Stable 12/23/2016 no Bulgaria Fitch BBB- / Positive 11/10/2008 no Bulgaria S&P BB+ / Positive 06/02/2017 1 notch upgrade? Cyprus DBRS BB L / Stable 06/02/2017 positive outlook? European Union DBRS AAA / Stable 07/11/2014 no Ireland S&P A+ / Stable 06/05/2015 no Sweden Moody's AAA u / Stable 11/15/2003 no Source: Bloomberg