The Week Ahead Key Events 27 Aug 2 Sep, 2018
Macro & FICC Research Week Ahead Monday 27 August 2018 Key Economic Indicators & Events: 27 Aug 2 Sep, 2018 Date CET Country Event Period SEB forecast* Consensus* Last* Mon 27 Tue 28 Auctions: US to sell bills (17.30) and notes (19.00). Other: UK markets closed for summer bank holiday 09.30 SWE Household Lending Jul 6.2 6.2 6.3 10.00 GER IFO Climate Expectations Current Aug 101.5 97.8 105.2 101.8 98.5 105.3 101.7 98.2 105.3 10.00 SWI Total sight deposits Domestic deposits --- 576.7bn 472.6bn 14.30 US Chicago Fed Nat activity index Jul 0.45 0.43 Auctions: US to sell 5y notes (19.00). Speeches: ECB board member Praet speaks (13.00). Reports: SSM (07.30). Other: ECB main refinancing operational result. 06.30 NOR Consumer confidence Q3 18.1 --- 19.6 07.00 SWE SEB publishes Nordic Outlook 09.30 SWE Trade balance Jul -2.0bn --- -0.5bn 09.30 SWE Retail sales Jul 0.0/0.4 0.2/0.5-1.8/0.2 10.00 EMU M3 money supply Jul 4.1 4.3 4.4 14.30 US Advanced goods trade balance Jul -$69.0bn -$68.3bn 15.00 US S&P CoreLogic CS 20-City Jun 0.2/6.4, --- 0.2/6.51, 211.9 16.00 US Richmond Fed manufacturing index Aug 18 20 16.00 US Conference Board consumer confidence Aug 126.8 126.5 127.4 Wed 29 Auctions: Norway to sell bonds (11.00), Italy to sell bills (11.00), Sweden to sell SEK5bn 82d bills (11.00), Germany to sell EUR3bn 2023 bonds (11.30), US to sell USD17bn 2y notes (17.30) and USD31nb 7y notes (19.00). Speeches: BoJ Suzuki speaks in Naha (03.30). Reports: Academedia (08.00). 07.00 JPN Consumer confidence index Aug 43.3 43.5 08.00 GER GfK consumer confidence Sep 10.6 10.6 08.45 FRA GDP Q2p 0.2 q/q / 1.7 y/y 0.2 q/q / 1.7 y/y 14.30 US GDP AR qoq Personal consumption Q2 s 4.0 4.0 3.9 4.1 4.0 14.30 US GDP price index Core PCE Q2 s 3.0 2.0 3.0 2.0 16.00 US Pending home sales Jul 0.5/--- 0.9/-4.0 Thu 30 Auctions: Riksbank to buy SGB1047 & 1058 (10.00), Sweden to sell SGBI3113 (11.00). Reports: Elekta (07.30). Other: Swedish National Financial Management Authority (ESV) publishes government budget outcome (09.00). 01.50 JPN Retail sales Jul -0.3/1.2 1.5/1.8 08.00 NOR Retail sales ex autos Jul 1.1, 0.6 1.0/--- -2.9/-0.2 09.00 SWI KOF leading indicator Aug 101.1 101.1 09.00 SWE NIER consumer confidence Aug 99.5 100 99.8 09.00 SWE NIER manufact. Conf. Economic tendency Aug 117.5 109.0 116.9 109.0 118.1 109.6 09.30 SWE Wages non-manual workers Jun 2.1 11.00 EMU Economic confidence Business climate Aug 112.0 1.26 112.1 1.29 11.00 EMU Industrial confidence Services confidence Aug 5.5 15.2 5.8 15.3 11.00 EMU Consumer confidence Aug f -1.9-1.9 14.00 GER CPI Harmonized Aug p 0.2/2.1 0.3/2.1 0.2/2.0 0.2/2.1 0.3/2.0 0.4/2.1 14.30 CAN GDP annualized Q2 3.0 1.3 14.30 US Personal income spending real spending Jul 0.4 0.4 0.2 0.4 0.4 0.3 14.30 US PCE deflator Core Jul 0.2/2.3 0.2 0.1/2.2 0.1 Fri 31 Auctions: Italy to sell bonds (11.00), Sweden to sell SEK500mn of 2027 linkers, UK to sell bills (12.00). Other: Sweden sovereign debt to be rated by S&P, Italian sovereign debt to be rated by Fitch. Speeches: ECB board member Guidos speaks in Spain. Reports: SAS (08.00). 01.30 JPN Tokyo CPI Ex-fresh food Ex-fresh food & energy Aug 1.0 y/y 0.8 0.5 0.9 0.8 0.5 01.50 JPN Industrial production Jul p 0.2/2.6-1.8/-0.9 03.00 CHI PMI manufacturing Non-manufact Composite Aug 51 --- --- 51.2 54 53.6 08.00 DEN GDP SA Q2 p 0.3/--- 0.4-0.6 08.00 NOR Credit indicator growth Household Jul 5.9 --- 5.8 --- 08.00 FIN GDP Q2 --- / --- 1.2 / 3.1 10.00 NOR Norges Bank daily FX purchases Sep NOK -600mn --- NOK -600mn 10.00 NOR Registered unemployment NSA Aug 2.4 2.4 2.5 11.00 EMU CPI Core Aug a 2.1 1.0 2.1 1.1 2.1 1.1 11.00 EMU Unemployment Jul 8.2 8.2 8.3 15.45 US Chicago purchasing manager Aug 63.0 65.5 16.00 US U. of Mich. Sentiment Aug f 95.5 95.3 * % MoM/YoY unless otherwise stated. Karl Steiner, karl.steiner@seb.se
Monday 27, 09.30 SWE: Household lending (Jul) % yoy SEB Cons. Prev. Household lending 6.2 --- 6.3 Non financial corporations --- --- 7.5 After being largely stable since the middle of last year household lending has slowed considerably over the last 3-4 months. Declining home prices imply that the growth rate will slow, but on the contrary high completions of new homes suggest that the slowdown will be more gradual than indicated by the last 3 months. Higher amortizations are also expected to contribute to a slowdown in lending going forward. Household lending has to slow to 4.5-5% y/y in order to stabilize household debt to incomeratio.
Monday 27, 10.00 GE: Ifo bus. climate (Aug) SEB Cons. Prev. Business climate 101.5 101.8 101.7 Business expectations 97.8 98.5 98.2 Current assessment 105.2 105.3 105.3 The ifo business fell slightly in July, widening the gap vs. its Nov-17 alltime to 3.5 index points. The cooling-off in business sentiment was apparent in Manufacturing and Trade whereas sentiment improved in Services and Construction For August, the ZEW investor sentiment survey posted a slight improvement both of the current situation assessment and growth expectations. Likewise, the German Compositive PMI delivered a mildly positive surprise (55.7 vs. 55.0 in June) due to improving Services sentiment which offset a decline in Manufacturing sentiment Contrary to the ZEW and PMI indications the latest slump of German industry orders and production highlights the risk further downward correction in the ifo current situation assessment. Against the backdrop of continuing global trade tension, a further erosion of Ifo business expectations also appears more likely than a rebound.
Tuesday 28, 06.30 NOR: Consumer confidence (Q3) Index, SA, trend-adj. SEB Cons. Prev. Consumer confidence 18.1 -- 19.6 Micro/Macro, expected -- -- 21.9/19.3 Norwegian quarterly consumer confidence declined marginally in Q2. The indicator remains slightly above its long-term average, signalling strong household optimism. The indicator has been on an upward trend since mid-2016, when the Norwegian economy commenced its recovery following plummeting oil prices. Due to a Brent oil price that has established itself above the $70/bl level, tight labour markets and solid economic growth, confidence has returned to 2014-levels. We concluded from the Q2 survey that the housing decline in 2017 failed to leave a marked impact on households optimism. Looking ahead, we forecast consumer confidence to remain at strong levels, underpinned by the positive growth outlook. The anticipated September rate hike from Norges Bank remains a downside risk to households confidence. 4
Tuesday 28, 09.30 SWE: Trade balance (Jul) SEK bn SEB Cons. Prev. Actual -2.0 --- -0.5 The trade balance showed signs of stabilisation in the first half of this year after trending lower since 2006. In Q2 the trade balance turned markedly negative again. Strong imports is the main driver of the shrinking trade surplus, while exports have been rising at a moderate pace. We predict that exports will become a more important driver of growth while at the same time domestic demand is seen to slow. This suggests that the trade balance will recover going forward. The trade surplus according to national accounts, which also includes services and merchanting is still showing a significant surplus (approximately 4% of GDP).
Tuesday 28, 09.30 SWE: Retail sales (Jul) % mom/yoy SEB Cons. Prev. Retail sales 0.0/0.4 0.2/0.5-1.8/0.2 Retail sales declined sharply in June after being strong during the 3 preceding months. A large decline in durable goods trade explains the decline in July, while consumption of mostly food remains elevated compared to the underlying trend. Parts of the weak durable goods trade is likely to be temporary, but warm summer weather is expected to have weighed on sales also in July (weak clothes sales supports this assessment). We expect only a small change in August. Weak sentiment among households imply that household consumption will continue to struggle in the second half of this year. Strong retail sales of mostly food has been an important driver behind the strong retail sales outcomes during the spring. We do not see any particular underlying reason for this upturn, which suggests it will rebound lower. In 2107, a pattern emerged where initially strong retail sales were revised significantly lower after 2-3 months. As the reason was uncertain, there is a risk that the surge in recent months will be revised lower as well.
Tuesday 28, 10.00 EZ Money supply M3 (July) SEB Cons. Previous M3, % y/y sa 4.1 4.3 4.4 credit to EZ residents --- --- 3.1 Loans to private sector --- --- 2.8 Having fluctuated between 4.3% and 5.3% y/y for three years, growth of money supply M3 dropped below this range in February but returned back into it in June (4.4%) aggregate loan dynamics ( Credit to EZ Residents ) remained broadly unchanged in June as growth in Credit to General Government bounced back from its 17 months downtrend. At the same time, private sector loan growth slid back to 2.8% from its nine-year high (3.0% in May-18). Although the gap between private sector loan growth and the Headline M3 growth rate widened to 1.6%, we expect continuing progress in banks NPL reduction to narrow this gap in coming quarters along with M3 growth settling in a 3.5-4% range.
Tuesday 28, 16.00 US: Conference Board Consumer Confidence (Aug) SEB Cons. Prev. Headline 126.8 126.5 127.4 The Conference Board index rose slightly in July, topping expectations. The current conditions index rose but the expectations index weakened. Consumers assessment of the present is now at the highest level since 2001. Strong sentiment about the present situation appears to be mainly driven by labour market conditions. According to the report, 43.1% of respondents saw jobs as plentiful, the largest share since March 2001. Reports that jobs were hard-to-get edged lower. The gap between the present situation and expectations sub-indices continues to widen and is now larger than the gap ahead of the financial crisis although still smaller than the gap ahead of the downturn in 2000-2001. The gap does not suggest that we are close to a recession but does signal that the US economic cycle continues to mature. Consumer confidence will be sustained by the tight labour market and tax cuts but there are some headwinds including rising mortgage rates, rising gasoline prices and trade tensions. The University of Michigan consumer sentiment survey fell in August and this indicator is normally highly correlated with the Conference Board survey. We expect that the Conference Board index remained close to the level in July and forecast 126.8.
Thursday 30, 08.00 NOR: Retail sales (Jul) % mm/yy change SEB Cons. Prev. Retail sales exc. autos (volume) 1.1/0.6 1.0/-- -2.9/-0.2 Retail sales posted a hefty correction in June, falling 2.8% m/m. This follows a strong (and upward revised) 2.0% monthly increase in May. The index increased by 1.3% in Q2 relative to Q1. Household goods consumption, which accounts for 40% of private consumption and feeds directly into GDP, posted a smaller decline of 0.8% m/m. Sales have been very volatile on a monthly basis and private consumption was weak in the start of the year with quarterly growth of 0% in Q1. However, private consumption revived strongly in the Q2 GDP report, driven by a 1.5% q/q rebound in goods consumption. Rising employment growth, higher wages and consumer confidence above normal levels should underpin consumption going forward, though rising interest rates will work in the opposite direction. 9
Thursday 30, 09.00 SWE: Consumer confidence (Aug) SEB Cons. Prev. CCI 99.5 100 99.8 Inflation expectations 3.5 --- 3.5 Consumer confidence has gradually deteriorated during 2018, but recovered slightly in July. The outlook for confidence going forward is mixed. The labour market is strong but there are signs of a slowdown in job growth from the current firm pace. Upward pressure on consumer prices from energy and earlier SEK depreciation is denting household incomes. Home prices appears to be stabilizing but as shown by the graph over confidence and home price expectations (SEB housing price indicator), home price trends do not appear to have been of major importance for confidence. Given the strong labour market and declining unemployment consumer confidence should be at higher levels. Still, households have remained cautious to increase spending over the past 3-4 years. Confidence has even dropped below the historical average when the very strong employment growth seen in 2017 eased in the beginning of this year. We predict consumer confidence to remained subdued going forward.
Thursday 30, 09.00 SWE: Business confidence (Aug) SEB Cons. Prev. Manufacturing 117.5 116.9 118.1 Service sector 104.5 --- 103.7 Tendency indicator 109.0 109.0 109.6 Outlook for the manufacturing sector is mixed with a marked decline in PMI since the end of last year, but with manufacturing sentiment remaining at high levels. PMI often leads NIER sentiment and we expect the manufacturing confidence indicator to decline in August, despite a small recovery for PMI last month. The outlook for the domestic sectors is mixed with sentiment in services and retail sectors recovering in June, but with the trend in both sectors having stabilized slightly above their historical averages. Sentiment in construction has declined since the middle of last year, but there are signs of stabilization or even some recovery over the last 2-3 of months. Sentiment is still above the historical average. Housing starts have peaked but there has only been a small decline during the first half of this year. Sentiment in retail declined to a level below the historical average in July. We expect this sector to continue to struggle due to modest consumption growth and structural change driven by increasing internet trade.
Thursday 30, 11.00 EMU: ESI (Aug) SEB Cons. Prev. Economic confidence 111.5 112.0 112.1 Business climate indicator 1.23 1.26 1.29 Industrial confidence 5.5 5.5 5.8 Service confidence 15.0 15.2 15.3 Indicators have declined across the board so far this year since peaking in Dec- 17/Jan18. Despite the decline, indicator levels continue to point at above trend growth. Also, the development in the last months point at indicators now are moving sideways. The decline is driven by a combination of factor such as fear of trade war and other temporary weaknesses but also that the level was driven too high by the positive economic-political momentum during 2017. Noteworthy is that PMI s have been hit much harder than ESI with a growing gap between them that is difficult to explain. PMI was largely unchanged in August and we expect the same of ESI.. Taken the data-disappointments into account and the negative surprise indicators, households are holding up quite well as the labour market continues to improve. 12
Thursday 30, 14.00 Germany: CPI (Aug, prelim) % mm / % yy SEB Cons. Prev. CPI +0.2/2.1 +0.2/2.0 +0.3/2.0 HICP +0.3/2.1 +0.2/2.1 +0.4/2.1 The German preliminary CPI provides a last-minute indication for EZ inflation, for which the flash estimate is published one day later. Six German states report their CPI data from 9.00 am to midday. The pan-german inflation print is published at 2:00 pm as a population-weighted average of these six regional readings Consumer Prices (percent y-o-y) weight (percent) Jul-18 Jun-18 May-18 Apr-18 Baden Wurttemberg 18 2.2 2.4 2.3 1.7 Bavaria 22 2.2 2.4 2.3 1.7 Brandenburg 4 2.2 2.2 2.4 1.6 Hesse 11 1.8 1.8 1.9 1.5 NRW 31 2.0 2.1 2.1 1.5 Saxony 7 2.2 2.1 2.2 1.6 Germany 93 2.0 2.1 2.2 1.6 seasonality is neutral in Aug (5y avg. change m/m:+0.02%) energy prices presumably boosted the German CPI in August; crude oil prices (Brent, ) rose ~1% vs. their July average; gasoline prices rose ~2% and heating oil prices ~2.5%. More upside pressure on consumer prices should result from food prices which, contrary to their seasonal pattern, should have risen on the back of draught-related harvest losses..
Friday 31, 10.00 NOR: Registered unemployment (Aug) % SEB Cons. Prev. Registered unemployment rate (unadjusted) 2.4 2.4 2.5 The unadjusted jobless rate jumped 0.3ppt last month, following the usual seasonal pattern. A correction lower is expected in August. In seasonally adjusted terms we expect the unemployment rate to remain unchanged at 2.4%. A result in line with our prediction implies that the registered unemployment rate will be slightly above Norges Bank s August forecast of 2.2%. The jobless rate continues to signal that there is very little slack left in the labour market, and continued demand for workers driven by solid economic growth implies that the labour market should remain strong. The still-strong labour market, combined with a strong Oil Investment Survey and GDP data from last week, imply that we regard a September hike from Norges Bank as a done deal. The central bank has now cemented a September2018 rate hike in the rate path, but the trajectory for rate hikes thereafter remains conditional on the effect on indebted households. As a strong labour market and rising real wage growth are expected to underpin consumption growth ahead, such data will be important to track going forward.
Friday 31, 10.00 NOR: Norges Bank daily FX purchases (Sep) SEB Cons. Prev. Daily FX purchases (NOK mn) -600 --- -600 In Jan and Feb purchases were unchanged at NOK -900mn per day, but out of the blue NB lowered purchases in March to -800mn. Purchases were then adjusted slightly lower to -750 in June only to be lowered again to -600mn in July. According to the revised budget projection for 2018 the non-oil budget deficit is expected to grow to NOK 245.4bn. The oil price assumption is always one uncertainty as a higher oil price tends to increase government tax revenues in NOK and reduces NB daily NOK purchases. This is probably the reason why NB has lowered purchases several times this year. After the last reduction to -600mn daily purchases are now almost in line with what we expect for the reminder of the year. If the oil price remains stable purchases should stay at this level at least until November. Generally NB tends to hold purchases as stable as possible over time why this year s frequent changes have been a bit surprising.
Friday 31, 11.00 EMU: Unemployment (Jul) % SEB Cons. Prev. Unemployment 8.2 8.2 8.3 Unemployment has fallen by 0.7pp in the last year and the positive trend with rising employment and falling unemployment continues. The unemployment figure usually drops by 0.1pp every 1-3 months Indicators have weakened but are still at levels that point at decent growth ahead even if it ends up somewhat weaker in q/q-terms than what we had in 2017. Employment indicators continue to be strong and there are more and more signs that companies have trouble filling vacancies not only in the stronger labour market northern economies. Finding labour is ranked on the top when asking companies on what makes it difficult to ramp up production. Wage pressure is still low but is expected to rise gradually ahead especially in countries where resource utilization is high 16
Friday 31, 11.00 EMU: HICP, flash (Aug) %, yoy SEB Cons. Prev. Headline 2.1 2.1 2.1 Core 1.0 1.1 1.1 Headline CPI has accelerated during the spring rising above 2% during the summer. Higher energy prices is the driver and we predict base effects to lead to easing inflation rate during the autumn. Core inflation continues to be stable close to 1% and even if there has been some slight upside surprises over the last 2-3 months most indicators imply that the sideways trend will continue. Inflation pressures continue to be low but higher wage agreements in Germany and signs of rising labour shortage in many sectors means that wage inflation will pick up going forward. Also, higher international prices will increases the possibility that core inflation will start to increase as well. In 2018 the exchange rate will work in the opposite direction and we continue to predict a more gradual upturn in inflation than ECB.
Friday, Aug 24 & Aug 31 European Sovereign Rating Reviews Upcoming rating reviews Friday, 24 August 2018 Agency Rating / Outlook last change Change? Sweden Moody's Aaa / Stable 11/15/2003 no Friday, 31 August 2018 Agency Rating / Outlook last change Change? Italy Fitch BBB / Stable 04/21/2017 no Slovakia Moody's A2 / Positive 04/07/2014 no Lithuania S&P A / Stable 03/02/2018 no Sweden S&P AAA / Stable 01/23/2014 no Source: Bloomberg