Macroeconomics: The Day Ahead – 18 November 2020

Good Morning: The Long & the Short of it and The Bigger Picture

Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist

  • Digesting better than expected Japan exports, UK inflation indicators  & EU27 auto sales; US Housing Starts and Canada CPI ahead along with  further rash of central bank speakers; German, UK & US debt sales; pandemic news still very much dominant, though conflicting
  • US Housing Starts: further record for NAHB points to solid Starts, capacity constraints the key near-term headwind



At the risk of being rather repetitive, the day’s schedule has a goodly volume of major economic data and policymaker events today along with bond auctions in Germany, UK and USA, and more retailer earnings reports, but markets are unsurprisingly attempting to figure out how to react to hefty divergence in signals on the pandemic, i.e the continued surge in infection rates and the resultant increasing restrictions on activity, and on the other hand the hope offered by vaccine news. This ‘push me, pull you’ narrative is a recipe for spikey volatility, and would appear likely to be front and centre through year and into Q1. That said, it is the case that Asia is clearly faring a lot better than Europe or the Americas, and this does not appear to be just a transient trend.

Statistically there are Australian Wages, the full gamut of UK inflation data (slightly higher than expected due ot food and clothing prices, though mostly due to seasonal adjustment and base effects) and EU-27 auto sales to digest ahead of CPI data from the Eurozone (final) and Canada, while the US has Housing Starts, while policy meetings in Iceland and Thailand are expected to see rates left on hold. Canada’s headline CPI so expected to remain very subdued at 0.4% y/y, though core measures are expected to remain only modestly below the BoC’s 2.0% target at 1.8%/1.9%, where they have been for most of the past 3 years. US Housing Starts follow on from yet another record high (90) for the NAHB Housing Market Index, with the NAHB noting “Historically low mortgage rates, favourable demographics and an ongoing suburban shift for home buyer preferences have spurred demand and increased new home sales by nearly 17 percent in 2020 on a year-to-date basis. Though builders continue to sign sales contracts at a solid pace, lot and material availability is holding back some building activity.” Starts are expected to post another solid 3.2% gain to SAAR 1.46 Mln, and any miss relative to forecasts likely to be down the constraints cited by the NAHB.

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