Editor: Carl Hammer The Week Ahead Key Events 28 March 3 April, 2016 Editor: Lauri Hälikkä
Key Economic Indicators & Events: 28 Mar 3 Apr, 2016 THURSDAY 24 MAR 2016 Date CET Country Event Period SEB forecast* Consensus* Last* Mon 28 Other: Nordic, German, French, UK, Hong Kong, Australian markets closed. 14.30 US Personal income spending Feb 0.1 0.1 0.5 0.5 14.30 US PCE deflator core Feb -0.1/1.0 0.2/1.8 0.1/1.3 0.3/1.7 16.00 US Pending home sales Feb 1.5/--- -2.5/-0.9 16.30 US Dallas fed manf. activity Mar -28.0-31.8 Tue 29 Gov. auctions: US to sell 5y notes (19.00). Speeches: Fed s Williams (11.15), ECB s Makuch (13.00), Fed s Kaplan (19.00 & 22.00). 01.30 JAP Jobless rate Feb 3.2 3.2 09.30 SWE Retail sales Feb 0.4/4.2 0.5/4.1 0.7/4.0 09.30 SWE Trade balance household lending yoy Feb 1.5 I 7.6 SEK 2.5bn I --- SEK 1.6bn 7.5 10.00 EMU M3 money supply yoy Feb 5.0 5.0 15.00 US Case-Shiller house prices (CS-20) Jan 0.70/5.70 0.80/5.74 16.00 US Consumer confidence Mar 96 94.0 92.2 Wed 30 Gov. auctions: Sweden to sell bonds (11.00), Germany to sell bonds (11.30). Speeches: BOC s Patteron (20.20). Reports: Other: Norges Bank Q2 borrowing interval (08.30). 01.50 JAP Industrial production Feb, p -5.9/-1.7 3.7/-3.8 10.00 NOR Unemployment rate (AKU) Jan 4.5 4.5 4.5 11.00 EMU Eco. confidence indu. serv. cons. Mar 104.5 103.5 I-4.3 I 10.5I -9.7 103.8-4.4 10.6 --- 14.00 GER CPI HICP Mar, p 0.6/0.2 I 0.7/0.0 0.4/0.0 0.4/-0.2 14.15 US ADP employment change Mar 180k 198k 214k 16.30 US DOE crude oil inventories Mar 25 --- 9357k Thu 31 Reports: Jays. Speeches: Fed s Dudley (23.00) 01.05 UK GfK consumer confidence Mar -1 0 08.45 FRA CPI HICP Mar, p --- 0.3/-0.2 0.3/-0.1 09.00 DEN GDP qoq/yoy Q4, f --- 0.2/0.6 09.55 GER Unemployment rate change Mar 6.2 I -0.3 6.2-10k 10.00 NOR Retail sales ex. autos I goods consumption Feb 0.2 I --- -0.3 I --- 0.9/0.7 I 0.9/1.2 10.00 NOR Norges Bank daily FX purchases Apr NOK -900mn --- NOK -900m 10.30 UK Mortgage approvals current account Feb --- 74.6k GBP -17.5bn 10.30 UK GDP qoq/yoy Q4, f 0.5/1.9 0.5/1.9 11.00 EMU CPI estimate yoy core Mar -0.1/0.9-0.1/0.9-0.2 0.8 14.30 US Initial jobless claims Mar 26 --- --- 15.45 US Chicago PMI Mar 49.8 47.6 Fri 1 Speeches: Fed s Mester (19.00). 01.50 JAP Tankan large manf. all industry CAPEX Q1 10 I 9.4 12 10.8 03.00 CHI PMI manufacturing non-manufacturing Mar 49.3 --- 49.0 52.7 03.45 CHI PMI manufacturing (Caixin) Mar 48.3 48.0 04.00 JAP PMI manufacturing (Nikkei) Mar, f --- 49.1 08.30 SWE PMI manufacturing (Silf) Mar 52 --- 51.7 09.00 NOR PMI manufacturing Mar --- 48.4 09.55 GER PMI manufacturing (Markit) Mar, f 50.4 50.4 10.00 NOR Credit growth indicator yoy I Households Feb 5.1 5.3 I 6.1 10.00 EMU PMI manufacturing (Markit) Mar, f 51.4 --- 10.30 UK PMI manufacturing (Markit) Mar 51.4 50.8 11.00 EMU Unemployment rate Feb 10.2 10.3 10.3 14.30 US Non-farm payrolls unempl. hourly earnings Mar 170k I 4.9 I 0.1/- 202k 4.9 0.2/--- 242k 4.9-0.1/2.2 15.30 CAN PMI manufacturing (RBC) Mar --- 49.4 15.45 US PMI manufacturing (Markit) Mar, f 90.5 --- 16.00 US ISM manufacturing Michigan sentiment Mar 52 I --- 50.4 90.5 49.5 90 * % MoM/YoY unless otherwise stated. Benjamin Dousa, +46 8 506 230 23 This report is produced by Skandinaviska Enskilda Banken AB (publ) for institutional investors only. Information and opinions contained within this document are given in good faith and are based on sources believed to be reliable, we do not represent that they are accurate or complete. No liability is accepted for any direct or consequential loss resulting from reliance on this document. Changes may be made to opinions or information contained herein without notice. Any US person wishing to obtain further information about this report should contact the New York branch of the Bank which has distributed this report in the US. Skandinaviska Enskilda Banken AB (publ) is a member of London Stock Exchange. It is regulated by the Securities and Futures Authority for the conduct of investment business in the UK.
Monday 28, 14.30 US personal income and spending (Feb) Cons. Prev. Personal income 0.1 0.5 Personal spending 0.1 0.5 PCE deflator YoY 1.0 1.3 PCE core YoY 1.8 1.7 Both consumer spending and income were impressive in January, beating market expectations. Takeaway: no US recession in the cards. Core PCE inflation was well above expectations as well and the monthly gain was the highest since 2007. As such, the year-onyear trend was pushed up to 1.7% which is a significant increase compared to just a few months ago when core PCE inflation was running at 1.3% Despite strong employment gains in February, the income side was weaker thus suggesting that personal income and spending numbers will be on the weak side too. The weak retail sales report masks a much more robust performance when adjusted for inflation, so in real terms consumer spending probably picked up in the first quarter. With respect to the February numbers, we stick close to the consensus on this one.
Tuesday 29, 09.30 SWE: Retail sales (Feb) % mm/yy SEB Cons. Prev. Retail sales 0.4/4.2 --- 0.7/4.0 Sentiment indicators for the retail sector have eased slightly in the beginning of the year, but remains well above the historical average. Sales volumes imply that sales could accelerate further. Clothes and shoes sales (3.3%/3.3% y/y) were firm in February. Despite being strong in January the level was still slightly below the short term trend and we expect sales to continue to rise in February. 2016-03-29 WEEK AHEAD - KEY EVENTS
Tuesday 29, 09.30 SWE: Trade balance (Feb) SEK bn SEB Cons. Prev. Actual 1.5 --- 1.6bn Seasonally adjusted 1.0 --- The trade balance trended lower in 2013 and 2014, but it has turned higher again since the beginning of 2015, driven by a lower oil price and gradually recovering goods exports. Very strong growth for imports highlights the strong Swedish domestic demand. We expect the trade surplus to resume its downward trend once the oil price stabilises. 2016-03-29 WEEK AHEAD - KEY EVENTS
Tuesday 29, 09.30 SWE: Household lending/m3 (Jan) % y/y SEB Cons. Prev. Household lending 7.6-7.5 Non financial corporations - - 4.7 Home prices took another large step higher in January and February after showing signs of stabilizing in the end of last year. SEB Housing Price indicator has recovered and remains at levels implying strong price increases. Housing starts dropped in Q4 after 4-5 quarters with a strong upward trend. We expect household lending to continue to trend higher, but the upturn seems to have lost some momentum over the last 3-4 months. 2016-03-29 WEEK AHEAD - KEY EVENTS
Tuesday 29, 10.00 Euro zone: Money supply M3 (Feb) M3 (sa, y/y) Cons 4.9 Prev 5.0 Loans to the private sector (%, y/y) 0.5 0.6 Annual growth in broad money supply M3 is expected to have remained robust in February 2016, mainly supported by low interest rates as well as the impacts of the ECB s massive liquidity injection. A high annual growth rate of money supply M1 will suggest that money holders continue to prefer highly liquid assets. Turning to the main counterparts of M3, latest figures on credit creation to private households show that the ECB s very expansionary policy is only very slowly finding its way into the real economy. We do not expect M3 statistics for February to show any major improvement in credit creation. 6
Tuesday 29, 16.00 US Conference Board consumer conf. (Mar) Cons. Prev. Total 94 92.2 Conference Board consumer confidence fell back in February to a seventh-month low, probably reflecting the early-year equity sell-off consumers were indeed the most bearish on the stock market since 2012. The correlation is high between the Conference Board and the Michigan index. While the University of Michigan index fell back in March, a forecasting model where the Conference Board index is explained by the Michigan index is suggesting that the move lower in the Conference Board last month was too big. In addition, financial markets have indeed reversed course over the past several weeks thus suggesting that a rebound is likely. We thus take the over on this one and forecast a 96 reading.
Wednesday 30, 10.00 NOR: LFS unemployment (Jan) % of labour force SEB Cons. Prev. Unemployment LFS --- --- 4.5 Labour markets are weakening, but the latest report from the Norwegian Labour and Welfare Administration showed the number of people registered as unemployed decreased in March. The Labour Force Survey has deteriorated sharply over the past 1 ½ years. Employment growth has stalled as the general economy is affected by sharply downshifting activity within the petroleum sector. As a result, the LFS unemployment rate has jumped (and partly due to a marked acceleration in the labour force, which has now corrected). There is still a large divergence between the two measures. We expect the gap to narrow going forward as the rise in LFS unemployment becomes more gradual while registered unemployment becomes more broadly based (and not only centered to oil-related counties). We expect the LFS unemployment rate to peak around 5% this year. % of labour force 6,0 5,5 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 % of labour force LFS unemployment rate, 3 mth. average Reg. unemployed and employment schemes* *Seas. adj. (SEB) 05 06 07 08 09 10 11 12 13 14 15 % change (12M) % of labour force 6 6,0 5 Employment, 3 mth. average (LHS) LFS unemployment rate, 3 mth. average (RHS) 5,5 4 5,0 3 4,5 4,0 2 3,5 1 3,0 0 2,5-1 2,0-2 05 06 07 08 09 10 11 12 13 14 15 6,0 5,5 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,5
Wednesday 30, 11.00 EMU: Economic sentiment indicator (ESI) (Mar) SEB Prev. Economic confidence (ESI) 104.5 103.8 In line with latest limited improvements in other leading indicators for the euro area economy, we expect a slight rise in the EU Commission s Economic Sentiment Indicator. It will therefore suggest that the moderate recovery is still ongoing. The economy is weathering the headwinds coming from outside the euro area quite well. On the other hand, the ECB s massive stimulus is not sufficient to give the economy a major boost. The ECB s monetary policy will have to remain very accommodative for a very long time. 9
Wednesday 30, 14.15 ADP employment change (Mar) Cons. Prev. ADP 198K 214K The ADP surprised to the upside in February and the headline was not far off the 230 advance in private payrolls two days later. The consensus is looking for a slowdown to slightly below 200k in March which may seem a tad high given that service sector employment seems to be slowing down according to the ISM index. Looking ahead, there is every reason to believe that US employment growth will slow down materially this year compared to 2015. The unemployment rate is already at the NAIRU and as such it is getting harder for business to fill vacant positions. Such a slowdown should not be confused with recession risks rising; instead slower employment growth should be expected at this stage of the business cycle. We forecast a 180k advance, which is below consensus.
Thursday 31, 10.00 NOR: Retail sales (Feb) % mm/yy change SEB Cons. Prev. Retail sales excl. autos (volume) --- --- 0.9/0.7 Retail sales started the current quarter on a slightly firmer note by showing a solid gain in January and more so than expected. The trend is still very modest, although better than what very gloomy sentiment would suggest. Retail sales is notoriously volatile on a month-to-month basis as proven by larger-than-expected rebound/payback in January/December. The broader gauge of households goods consumption (which feeds directly into GDP) gained 0.9% on the month in January, boosted by a rebound in spending on electricity. Our forecast implies a slowing in early 2016 with the quarterly growth rate in private consumption being halved in Q1 from last Q4. Spending on goods is expected to show a very modest 0.2% sequential gain, matching the January level relative to the Q4 average. Private consumption remains the main downside risk to mainland GDP this year, although so far upside risk lingers.
Thursday 31, 10.00 NOR: Norges Bank daily FX purchases (Apr) SEB Cons. Prev. Daily FX purchases (NOK mn) -900 -- -900 After the somewhat larger than expected increase in February to NOK 900mn per day the daily NOK purchased was unchanged in March. One reason for the sharp increase in Feb purchases could be that it simply reflects an increased budget deficit due to lower tax revenues from the mainland economy or plans to increase fiscal spending. Usually NB intends to hold purchases stable over time, which means purchases are quite likely to remain at 900mn per day in April. On the back of a lowered oil price assumption, it seems reasonable that government petroleum revenues would decline to NOK 179bn in 2016. Norges Bank most likely will have to reduce purchases slightly in the second half of this year to around NOK 800mn per day. 12
Thursday 31, 11.00 EMU: HICP, flash (Mar) %, yy SEB Cons. Prev Headline -0.1 - -0.2 Core 0.9-0.8 The short-term forecast has been raised slightly due to the recovery for the oil price and we predict the inflation rate to return to zero during the spring. Parts of the low core inflation in February was driven by travel prices, which to some extent could be low temporarily. Still the forecast for core inflation has been lowered following lower than expected inflation rate in the beginning of the year. Wage inflation remained low in Q4. 2016-03-29 WEEK AHEAD - KEY EVENTS
Friday 1, 08.30 SWE: PMI manufacturing (Mar) Index SEB Cons. Prev PMI 52.0 --- 51.7 Manufacturing confidence according to the NIER survey declined in March, but continues to be far above PMI. The questions regarding the current situation in the NIER survey were largely stable, but are also slightly above the corresponding levels in PMI. European manufacturing and especially German PMIs were largely stable in March. US manufacturing sentiment has improved marginally from a low level. Hard data like industrial production and goods exports have been strong over the last 3-4 months. Goods exports remained relatively strong in January. 2016-03-29 WEEK AHEAD - KEY EVENTS
Friday 1, 10.30 UK PMI manufacturing (Mar) Cons. Prev. Manufacturing --- 50.8 UK PMI manufacturing fell to 50.8 last month after moving sideways for almost 1.5 years. It still remains on the expansionary side of the 50-level. In February services PMI also fell but it is still at a slightly better level. New orders have dropped to the 50-level while new export orders is back below the important watershed. Continued sterling weakness since Q4 last year may boost confidence among exporters. On the other hand uncertainty related to the upcoming EU referendum may dampen confidence in the UK in coming months. There is usually a fairly high correlation between PMIs in Germany, France and the UK, which indicates PMI should remain around 50.5 in March. Risks around our forecast are fairly balanced this time. 15
Friday 1, 11.00 EMU: Unemployment, Feb SEB Cons. Prev. Unemployment 10.2% 10.3% 10.3% Unemployment is trending lower and has now fallen by 0.1pp three months in a row and has in the last year fallen from 11.3% to 10.3%. We expect another 0.1pp fall in February. The improvement in the labour market is broad based within the region and the downturn is mainly driven by increasing employment (+1.2% y/y in Q4-15). Among the large-4 countries within the region, Spain is the strongest performer, Germany continues to show strength but Italy and France have disappointed with unemployment moving sideways in the last months. The labour market moving in the right direction is an important factor for growth. Household consumption has been a major driver during the last year. 2016-03-29 WEEK AHEAD - KEY EVENTS 16
Friday 1, 14.30 Nonfarm payrolls (Mar) Cons. Prev. Total 200K 242K Private 190K 230K U rate 4.9% 4.9% hourly %MoM 0.2% -0.1% hourly %YoY --% 2.2% Change household emp. -- 530K Avg. weekly hours Participation rate 34.5 -- 34.4 62.9% While employment growth was stronger than expected in February, the details of the jobs report were not as robust with wage growth down slightly according to average hourly earnings and the average workweek shrank too. The decline in average hourly earnings may reflect a seasonal quirk that actually is at play in March too, which is why our forecast is for a below-consensus 0.1% earnings increase. Looking beyond that, however, we expect earnings to pick up significantly in April and beyond. While employment growth has been running very strong over the 6 months, the unemployment rate has only decreased 0.2 percentage points over that time period. The reason is that the participation rate has rocketed higher. What this is suggesting is that discouraged workers may be returning to the workforce. For structural (demographic) reasons, the participation rate is still expected to trend down slowly over time. Labor market indicators have been mixed in recent weeks; initial jobless claims suggest ongoing strong employment growth and ISM service sector employment index has posted a marked slowdown. Furthermore, temporary help service employment, another leading indicator, decreased in Feb. At the time of writing, we are still missing some important input data in our forecasting model, but assuming unchanged readings on the two ISM employment indices, our indicator model is suggesting only 140k employment growth in January. As such, we take the lowside on this one and forecast a 180k on the headline, 170k on private employment, 0.1% on average hourly earnings and 4.9% on the unemployment rate.
Friday 1, 16.00 ISM manufacturing (Mar) Cons. Prev. ISM 50.4 49.5 The February ISM manufacturing report was better than expected, thus suggesting that the index may rise above 50 before long, after 5 successive month below its expansion/contraction threshold. The new orders and production components were encouraging in particular. The regional manufacturing index that we currently have are suggesting an uptick too. Our early-indicator forecasting model, which is using the Philly Fed index, the Empire index, the Richmond Fed index as well as new orders and new export orders, is actually suggesting a huge bounce in March to 54.0. While the consensus is looking for an uptick to 50.4 in March, we expect an upside surprise and forecast a 52 reading.