Macroeconomic View – German exports accelerating

Mon 12 Feb 2018

German exports were weak for the month, up only 0.3%, but are still accelerating year-on-year.

Chinese exports were stable, but imports picked up significantly, offsetting last month’s weak data.

UK

The Markit Services PMI dropped slightly to 53 from 54.2. The Halifax House Price Index year-on-year for the 3 months to January fell from 2.7% to 2.2%, while the RICS Housing Price Balance in January was stable at 8% but above expectations for 5%. Manufacturing production year-on-year for December fell markedly from 3.8% to 1.4%, as industrial production for the same period followed suit, declining 2.6% to 0%, below estimates for 0.3%. The NIESR GDP estimate for the past 3 months came in at 0.5%, down from 0.6% but above expectations for 0.3%. The Bank of England decided to hold the base rate at 0.5% last week, with members of the MPC voting unanimously to keep them on hold. However the report released by the BoE suggests that rates may rise more quickly and more sharply than previously speculated.

US

The final MarkitUS Manufacturing PMI for January was un-revised at 55.5, above the 55.1 in December. The figure indicates the strongest expansion in factory activity since March 2015 as production and new orders grew the most in twelve months and purchasing activity rose at steepest pace since September 2014. The manufacturing PMI input prices index registered 58.5 in January, with the most recent rise in input costs driven by greater raw material prices and higher transportation costs. US initial jobless claims, a measure of the number of people claiming unemployment benefits, fell by 9K to 221K in the week ended 3 February, beating market expectations of a small rise to 232K. The 4-week moving average which removes the week-to-week volatility of the measure fell to the lowest since March 1973, suggesting the US economy is at or near full employment.

EU

The Markit Eurozone composite PMI for January was revised up to 58.8 from 58.6, as the services element saw an increased revision for the period. January’s PMI data indicates that the European private sector is growing at its strongest pace since June 2006, underpinned by solid inflows of new business. Industrial production in Germany increased 6.5% year-on-year in December 2017, slightly below consensus estimates of 6.8% and up from November’s growth of 5.5%. Industrial production in Germany has been on a strong upward trend over the last year. Mario Draghi, President of the European Central Bank in a letter to the European Union, said more harmonised rules across the Eurozone would make it easier for banks to merge potentially making them more efficient.

Emerging Markets and Japan

In Japan the Markit Services PMI rose from 51.1 to 51.9 in January. Labour cash earnings year-on-year for December dropped from 0.9 to 0.7. It has been hovering around 1% recently, however the BoJ can’t reach its inflation target unless household purchasing power, hampered by depressed wages, improves. In China, year-on-year imports in Yuan for January rose to 30.3% from 18.7%, as exports fell slightly to 6% from 7.4%. CPI inflation in January fell to 1.5% from 1.8%, in line with expectations. PPI inflation also slowed from 4.9% to 4.3%. The Yuan depreciated the most since the 2015 devaluation firstly due to speculation that China may be easing up on outflows, and secondly due to the US Dollar import figure surging to 37% last month.