The Economic Week Ahead

Main Macro Events This Week

Trading should be choppy to start the new year as volume picks up and positions are readjusted after month- and year-end flows and rebalancings. Data will be a focal point with key numbers on employment, manufacturing and services ISMs, sales, and trade. Fedspeak is back on tap after the holiday hiatus.

United States: The December nonfarm payroll report (Friday) headlines this week. Consensus forecasts a 190k increase, above the 177k 6-month average. The unemployment rate should hold at 4.1%. Earnings will be an important indicator and projects are for 0.3% increasee. The ADP private employment survey for December (Thursday) is forecast rising 210k following the 190k increase in November. Manufacturing reports will kick off 2018 with the final December Markit manufacturing index on tap (Tuesday). The December manufacturing ISM (Wednesday) is expected to slip to 58.2 from November’s 58.2. The December services ISM (Friday) is seen little changed at 57.5 after falling 2.7 points to 57.4 previously. The 60.1 print from October was the highest since 2005. Also on tap this week are domestic light vehicle sales for December (Wednesday), estimated to hold steady at the November pace. The FOMC minutes (Wednesday) to the December 12, 13 policy meeting aren’t likely to shed new light on the outlook given the meeting included the Summary of Economic Projections and Chair Yellen’s final press conference. However, we could get a little color on the various views on growth and inflation and the trajectory of policy. Remember the Fed hiked rates another 25 bps and indicated three more tightening are likely in 2018. There were two dissents with the doves Evans and Kashkari voting for no rate change.

Canada: The employment report (Friday) is expected to show a 5.0k gain in jobs during December after the stunning 79.5k surge in November. The unemployment rate is seen edging up to 6.0% from 5.9%. The trade report (Friday) is projected to reveal a slight narrowing in the deficit to -C$1.3 bln in November from -C$1.5 bln in October. Exports are projected to rise 1.0% after the 2.7% bounce in October. A 1.0% gain in the industrial product price index (Thursday) is anticipated during November after the 1.0% jump in October. There is nothing from the Bank of Canada this week.

Europe: The economic calendar for the first week is unlikely to shake up the overall economic picture. Final Eurozone PMI readings for December are expected to confirm preliminary numbers of 60.6  for the Eurozone Manufacturing reading (Tues) and 56.5  for the Services number (Thurs). Confidence remains high as strong orders growth and a substantial backlog of work leaves companies running into capacity constraints and taking on more staff. Against that background German Dec jobless numbers (Wednesday) are seen falling a further -13K (med -12k), leaving the jobless rate at a post-unification low of 5.6%. Eurozone Dec HICP inflation is expected to show a decline in the headline rate to 1.4% y/y (med same) from 1.5% this is likely to have been largely due to energy and food price effects, which should leave core inflation steady or slightly higher.

UK: The Brexit negotiation process will continue to dominate the UK’s agenda, and the weak political position of the prime minister and her minority government will continue to be a font of uncertainty for investors and business leaders. Talks on a post-Brexit trade deal are scheduled to start in March, just one year before the UK departs the EU. The data calendar this week is highlighted by the PMI surveys for December. The manufacturing PMI (Tuesday) to correct slightly to a 57.9 headline reading, after 58.2 in the previous month (an outcome that had exceeded expectations by some margin). The construction PMI (Wednesday) has us anticipating an unchanged 53.1 reading, while we expect the services PMI (Thursday) to rebound a portion of November’s unexpected decline in lifting to a 54.0 headline, from 53.8.

Japan: is on holiday through Wednesday. The December manufacturing PMI (Thursday) is expected to bump up to 53.8 after rising 0.8 points to 53.6 in November. That was the highest since March 2014. The index was at 52.4 last December. Auto sales and FX reserves for December are also due (Friday).

Australia: The November trade balance (Friday) is the only top tier report on the docket. The surplus is seen widening to A$600 mln in November from A$105 mln in October. The Reserve Bank of Australia is again silent.

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