economic calendar - amazon web services...in 2018, the us dollar had its worst start to a calendar...

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Consilium Capital (Pty) Ltd is an authorised Financial Services Provider (FSP No. 5654) Consilium Securities (Pty) Ltd is a member of the JSE Ltd

Collectively referred to as “Consilium” or “Consilium Group”

Summary

The US macro calendar is relatively light,

with the highlight being the release of the

ISM NMI on Monday, the US trade

balance on Tuesday and various addresses

by voting and non-voting FOMC members.

In our view, January non-manufacturing

activity will not have been materially

affected by the cold winter weather in the

US north-east, and we will see an uptick in

the NMI to around 56.5. This is roughly

where the Index stood at the beginning of

2017. We do not foresee a major

response in the market to the outcome.

The US trade deficit is likely to widen in

the December report due for release on

Tuesday. The net effect will be a drag on

US Q4 GDP, but is actually reflective of

greater willingness of businesses to invest

and higher levels of consumer demand,

which are ramping up US imports.

The main Fed address will come on

Wednesday from William Dudley, the New

York Fed President. Dudley is an

automatic voter on the Committee but is

vacating his position this year. Dudley is

regarded as a pretty faithful adherent to

the majority Committee position on

inflation i.e. that the data is still equivocal,

but there is some indication of higher

headline inflation, but that the Fed does

not want to be in a position where the

labour market becomes too tight, and

wages start rising quickly, such that it will

have to chase inflation by tightening

policy too rapidly. Janet Yellen, of course,

vacated her position on February 3, so we

will have to see how this orientation

evolves under the stewardship of Jerome

Powell.

In South Africa, the highlight must be the

release of the SACCI Business Confidence

Index for January on Tuesday. This will be

the first confidence barometer that will

encompass the response of business to

the ANC Elective Conference held in

December and political developments

thereafter, which if the rand is anything to

go by, signal better policy, governance

and growth outcomes down the line.

Already in December, the BCI improved by

a further 1.3 index points to 96.4

following on the improved business mood

in November with an increase of 2.2 on

the 92.9 of October. The BCI was nearly

seven index points better in December

2017 than the lowest 2017 BCI level of

89.6 in August 2017. The BCI commented

already in December on “a more positive

business mood and political

developments that are expected to put

South Africa in a position for more

encouraging business and economic policy

options”. It saw evidence of a shift in

expectations toward greater policy

certainty and a more sustainable growth-

orientated domestic economic, a probable

Economic Calendar Week of February 05

United States and South Africa

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fresh approach towards business and

investor challenges, amid higher

expectations for regional and global

growth.

We anticipate a rise in the BCI to around

96.8, which might sound a bit

conservative, but it is not expected that

business confidence really take off until

after the February State of the Nation

address, the fiscal 2018 budget, the credit

rating decision from Moody’s as well as

such time as the details of the political

transition become a lot clearer. Business

owners will cautiously welcome

developments, but probably not show the

same enthusiasm as overseas investors,

who have piled into local equities amid a

rand which is strengthening all the while,

which benefits them as well. Cheaper

input costs for local businesses have yet

really to come through.

The market is really only looking for a

slight rise to around 96.6, but if a number

above 98 is forthcoming, this will be the

best BCI level seen since October 2015,

and will be a strong signal that companies

are becoming more inclined to deploy

some of that R1.5 trillion in cash on

corporate balance sheets to hire more

and invest in new or improved capital.

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UNITED STATES (source: Nasdaq.com)

Monday February 5 15h30: ISM Non-

manufacturing Index (NMI) for January

This is one of the key data releases of the

week.

The report will give critical insights into

the state of play in sectors of the

economy outside of manufacturing, in the

main services, but also agriculture,

mining, fishing and construction. The ISM

data is more readily relied upon than the

corresponding survey by Markit

Economics, the PMI Services Index. For

the record, the latter is also coming out

on Monday and is running below the

former at 53.7.

The NMI registered 55.9 in December, 1.5

percentage points lower than the

November reading of 57.4, after an initial

decline in October. The Non-

Manufacturing Business Activity Index

decreased 4.1 percentage points to 57.3

versus 61.4. This number is equivalent to

the measure of production in

manufacturing, and represented slower

growth, but growth none the same for the

101st consecutive month. The New

Orders Index registered 54.3, 4.4

percentage points lower than the reading

of 58.7 in November. The Employment

Index increased 1 point in December to

56.3. The Prices Index edged up 0.1 of a

percentage point from the November

reading of 60.7 to 60.8, indicating that

prices increased in December for the

seventh consecutive month.

According to the NMI, 14 non-

manufacturing industries reported

growth. Overall, the majority of

respondents’ comments indicated that

they finished the year on a positive note.

They also indicated optimism for business

conditions and the economic outlook

going forward.

In our view, January activity will not have

been materially affected by the cold

winter weather in the US north-east, and

we will see an uptick in the NMI to

around 56.5. This is roughly where the

Index stood at the beginning of 2017. We

do not foresee a major response in the

market to the outcome.

Figure 1: The ISM NMI over 12 months

(source: Institute for Supply

Management)

Tuesday February 6 15h30: US Trade

Balance for December

Despite a softer US dollar towards the

back-end of 2017, the net US trade

position is weakening. This is due not to

any fall-off in exports, which are rising due

to currency-induced increased

competitiveness, but due to faster rising

imports, as US jobs and incomes increase,

and business and consumer confidence as

well as investment and spending intensify.

In 2018, the US dollar had its worst start

to a calendar year in 22 years, with the

dollar index (DXY) getting below 89 by the

beginning of February. So, in time the

deficit will right itself, and lift US GDP

instead of currently retarding it.

The net trade effect was a major drag on

the Q4 2017 GDP number. In October

already the deficit widened to an

upwardly revised minus US$48.9 billion

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and in November widened further to

minus US$50.5 billion. The monthly

average two months into the fourth

quarter is therefore minus US$49.7 billion

which compares very unfavourably with

the third-quarter monthly average of

minus US$45.1 billion.

So, in November there were numerous

signs of strength. Exports rose 2.3% on

the month to US$200.2 billion led by 3.4%

growth in goods exports to US$134.6

billion, although service exports at

US$65.7 billion only inched higher by

0.1%. Exports of capital goods and

especially aircraft were very strong with

solid gains also posted for vehicles and

even consumer goods.

Imports, at US$250.7 billion, surged 2.5%

on the month indicating, as we have

noted, that domestic demand is very

robust. Details on the import side show a

big gain in capital goods imports, which

clearly points to new business investment.

Imports of consumer goods also rose and

very sharply as well, up US$2.4 billion to

US$52.4 billion. Oil imports rose nearly

US$1 billion on the month to US$15.7

billion reflecting an increase in both

volume and price.

Country data showed a small rise in the

deficit with China, now at minus US$35.4

billion on the month, which will not please

the Trump administration, and a sharp

rise in the deficit with the EU to minus

US$14.7 billion. Monthly deficits shrunk

with Mexico to minus US$6.0 billion,

Japan to minus US$5.8 billion, and Canada

to a monthly minus US$1.0 billion.

For December, we expect a pretty stable

US deficit because the DXY was still

above 92, and imports were still rising.

We are looking for a monthly deficit in

the region of minus US$51.5 billion.

Despite the number’s dampening effect

on the GDP read, it is in fact a reflection

of positive consumer and business

demand trends in the US. We think the

market will view it this way, although we

might see some renewed US dollar

selling.

Figure 2: DXY over 12 months (source:

marketwatch.com)

15h50: James Bullard speaks

St. Louis Federal Reserve Bank

President James Bullard will present a

paper on the “US Economy and Monetary

Policy”, at the 29th Annual Gatton College

of Business and Economics Economic

Outlook Conference in Lexington,

Kentucky, with audience Q&A.

Bullard was a one-time voting member of

the FOMC who subscribed to the “one-

and-done” approach to rates. He has no

influence on the current monetary policy

leaning. No market impact.

17h00: Job Openings and Labor Turnover

Survey for December

This is a very useful survey and is

scrutinized closely by the Fed, but the

data lags the official US Bureau of Labor

Statistics (BLS) Employment Report which

deals with payrolls and the

unemployment rate as well as the private

sector ADP payrolls report by over a

month. The JOLTS is also produced by the

BLS. In addition, the US labour market is

undeniably strong, so we do not think the

JOLTS has the same relevance as it is did

say a year ago.

The JOLTS covers data series not

addressed in other measures of labour

market strength, such as job openings,

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offers, separations, quits, layoffs and

discharges. In November, hires and

separations were little changed at 5.5

million and 5.2 million, respectively.

Within separations, the quits rate was

unchanged at 2.2% and the layoffs and

discharges rate was little changed at 1.1%.

Job openings held relatively steady at

5.879 million. This is generally seen as the

most significant number. The job openings

rate was 3.8% in November. The number

of job openings was little changed for

both the private and for government

sectors. Job openings increased in retail

trade (plus 88,000) but decreased in other

services (minus 64,000), transportation,

warehousing, and utilities (-60,000), and

real estate and rental and leasing (-

39,000).

We are looking for job openings to top

the psychological 6 million mark in

December. Again, we foresee little

market reaction because the series is so

dated.

Wednesday February 7 14h00: MBA

Mortgage Applications for the week

ended February 2

The Mortgage Bankers' Association

compiles various mortgage loan indices.

The purchase applications index measures

applications at mortgage lenders. This is a

leading indicator for single-family home

sales and housing construction. The

refinance index tracks refinancing activity,

and the composite or market index

combines the two.

In the week to January 5, the purchase

applications index rose 5.0%, with the

refinance index ramping up 11.0%, leaving

the market index better by 8.3% on the

week. In the week to January 12, the

purchase index rose 3.0%, with the

refinance index inclining 4.0%, leaving the

market index better by 4.1%. In the week

to January 19, the purchase index got up

6.0%, with the refinance index higher by

1.0%, and the market index was 4.5%

better off. So, to that point the trend was

clearly a strengthening one. But in the

week to January 26 the purchase index

fell 3.0%, as did the refinance index,

leaving the composite measure lower by

2.6%.

We attribute this development to the

sharp rise in the average interest rate on

conforming 30-year fixed rate mortgages

(US$453,000 or less). This rate rose 10

basis points to 4.33% in the January 12

week, then the highest since March 2017,

but still quite low by historical standards.

In the January 19 week, the rate inclined

another 3 basis points to 4.36% percent,

and in the following week got up again to

4.41%, a rise of 5 basis points. This was a

new high since March 2017.

Steady economic growth and a tightening

job market should underpin demand, but

the Republican tax legislation, which has

been opposed by the National

Association of Realtors, has the potential

to reduce demand due to changes to

deductions for mortgage interest and

state and local taxes.

15h30: William C. Dudley speaks

New York Federal Reserve Bank

president William Dudley will participate

as a panellist at the European American

Chamber of Commerce and Thomson

Reuters's “Banking Culture: Still Room for

Improvement?” event in New York City.

Dudley is vacating his position as New

York Fed President and thereby his

automatic voting role on the FOMC. He is

regarded as a pretty faithful adherent to

the majority Committee position on

inflation i.e. that the data is still

equivocal, but there is some indication of

higher headline inflation, but that the

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Fed does not want to be in a position

where the labour market becomes too

tight, and wages start rising quickly, such

that it will have to chase inflation by

tightening policy too rapidly. Yellen, of

course, vacated her position on February

3, so we will have to see how this

orientation evolves under the

stewardship of Jerome Powell.

18h15: Charles L. Evans speaks

Chicago Federal Reserve Bank

President Charles Evans will deliver a

speech and discuss current economic

conditions and monetary policy at the

Iowa Bankers Association Bank

Management Conference in Des Moines,

Iowa, with audience and media Q&A.

Evans was a voting member of the FOMC

last year and famously dissented in

December along with Neel Kashkari,

preferring not to lift the target range for

the federal funds rate. He is a noted

dove, and regards the data as not yet

indicating any sustainable pickup in core

inflation, which he argues is being held

back by structural features. He is not yet

confident that inflation will reach the

targeted 2.0% in the medium term, and

therefore sees no need to tighten

monetary policy in the here and now.

Together with Kashkari, Evans is no

longer a voting member on the FOMC.

Their influence on the Committee is now

more indirect and as a result the dovish

policy approach on the Committee has

been weakened.

Evans will probably traverse recent

inflation data and in particular data on

wages and salaries. He might point out

that there is evidence of the indicators

pointing in the right direction, but no

evidence of any sustained increase in

wages and hence in measures of core

inflation. He will refer to the December

core PCE Price index reading of 1.5%, a

number that was unchanged on the

month. The current inflationary trends

are visible at the headline level, and he

will say these are transitory in nature,

due in the main to a softer dollar and

higher oil prices.

22h00: Consumer Credit for December

Consumer credit measures the dollar

value of consumer instalment credit

outstanding. Changes in consumer credit

indicate the state of consumer finances

and are a harbinger of future spending

patterns. A distinction can be made

between revolving credit which is

principally credit card debt, and non-

revolving credit which entails ordinary

instalment loans.

In November, consumer credit extension

rose to a very outsize US$27.95 billion

indicating a very strong private sector

credit impulse, which in turn id reflective

of a buoyant consumer. We cannot see

November’s number, which was clearly

impacted by the impending holiday

season, being replicated in December. We

are looking for a slowdown in consumer

credit to around US$22 billion on the

month.

Thursday February 8 00h20: John C.

Williams speaks

San Francisco Federal Reserve Bank

President John Williams will deliver

remarks at the “Community Leaders

Luncheon” in Honolulu, Hawaii, with

audience and media Q&A. Williams

belongs to the majority Committee

faction like William Dudley (see above).

10h50: Robert S. Kaplan speaks

Dallas Federal Reserve Bank

President Robert Kaplan will participate in

a moderated Q&A session at the Global

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Interdependence Centre Conference in

Frankfurt, Germany with media Q&A.

Kaplan was a voting member of the

FOMC last year and harbours doubts over

the future course of core inflation in the

US although he always voted with the

majority. He is no longer a voting

member, however.

15h30: Initial jobless claims for the week

ended February 3

Initial jobless claims fell 1,000 in the

January 27 week, from a downwardly

revised 232,000 to 231,000. This was a

good outcome because distortions earlier

in the month that had taken the claims

number down to an unsustainable 45-year

low of 216,000. The 4-week moving

average that smooths out volatility fell

sharply to 234,500, the third straight

weekly decline. This level is considerably

better (5,000 plus) than the month-ago

trend of 240,000. This is the more

important number. Continuing claims in

lagging data for the January 20 week rose

13,000 to 1.953 million with the 4-week

average up 12,000 to a 1.933 million level

that was marginally higher than the

month-ago comparison. The

unemployment rate for insured workers

was unchanged at a very low 1.4%.

We expect initial jobless claims to fall a

little further to around 230,000 and for

the 4-week average to at least hold

steady.

16h00: Neel Kashkari speaks

Minneapolis Federal Reserve Bank

President Neel Kashkari will participate in

a moderated Q&A session in Pierre, South

Dakota, with audience Q&A.

Kashkari is no longer a voting member of

the FOMC. His views were similar, but a

little more dovish even than Charles

Evans (see above). He dissented on every

occasion last year when the Fed raised

the fed funds target range, believing that

rate hikes now would damage the US

economy. This is an outlier position. No

market impact expected.

Friday February 9 04h00: Esther L.

George speaks

Kansas City Federal Reserve Bank

President Esther George will discuss the

economic outlook at the “Wichita

Independent Business Association 2018

Annual Meeting” in Wichita, Kansas, with

audience Q&A.

George was a noted Committee hawk

and dissented along with Eric Rosengren

and Loretta Mester in late 2016,

preferring to hike rates by 25 basis

points. While Mester has returned as a

voting member, giving the Committee a

slightly more hawkish bias, George, is not

a voting member at present. Her views

though are similar to those of Mester.

We expect to hear a case being made for

at least three rate rises this year based

on an unemployment rate below the

longer-run natural rate of

unemployment, and stronger wage

pressures as indicated by measures like

the quarterly Employment Cost Index,

average hourly earnings in the monthly

payrolls report and the gauge of unit

labour costs in the quarterly productivity

report.

17h00: US Wholesale Trade for

December

Wholesale trade measures the dollar

value of sales made and inventories held

by merchant wholesalers. It is a

component of overall business sales and

inventories. The more important number

is the measure of the monthly change in

inventories, which feeds in to the total

inventory value, which is an important

component of US GDP. In the Q4 2017

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advance GDP number, inventories were

seen to have fallen, and were therefore a

drag on the headline growth number.

We already have the preliminary

estimate. Wholesale inventories were

said to have increased 0.2%month-over-

month to US$611.4 billion in December,

far lower than a downwardly revised 0.7

% gain in November. The current

consensus appears to be for a 0.8%

monthly gain, but we cannot see this

being achieved at all.

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SOUTH AFRICA (source: Trading

Economics)

Monday February 5 09h15: Standard

Bank Composite PMI for December

The Standard Bank Composite PMI

measures current and future activity in

South Africa’s manufacturing and non-

manufacturing sectors and is reported by

Markit Economics. In November, the PMI

read was 48.4, a drop of 0.4 points from

October and the lowest level since mid-

2016.

We are expecting a slight but largely

inconsequential rise to around 48.7.

Tuesday February 6 11h30: SACCI

Business Confidence Index (BCI) for

January

This is far and away the most important

macro release of the week, and will be the

first confidence barometer that will

encompass the response of business to

the ANC Elective Conference held in

December and political developments

thereafter, which if the rand is anything to

go by, signal better policy, governance

and growth outcomes down the line.

Already in December, the BCI improved by

a further 1.3 index points to 96.4

following on the improved business mood

in November with an increase of 2.2 on

the 92.9 of October. The BCI was nearly

seven index points better in December

2017 than the lowest 2017 BCI level of

89.6 in August 2017. The December

reading was the second best of the year.

Remember however, that in January 2017,

the BCI was actually at a level of 97.7,

above where it was at the end of the year.

That said, the average for the BCI in 2017

was slightly up to 94.4 compared to the

average of 93.5 for 2016.

The BCI commented already in December

on “a more positive business mood and

political developments that are expected

to put South Africa in a position for more

encouraging business and economic policy

options”. It saw evidence of a shift in

expectations toward greater policy

certainty and a more sustainable growth-

orientated domestic economic, a probable

fresh approach towards business and

investor challenges, amid higher

expectations for regional and global

growth.

We anticipate a rise in the BCI to around

96.8, which might sound a bit

conservative, but it is not expected that

business confidence really take off until

after the February State of the Nation

address, the fiscal 2018 budget, the

credit rating decision from Moody’s as

well as such time as the details of the

political transition become a lot clearer.

Business owners will cautiously welcome

developments, but probably not show

the same enthusiasm as overseas

investors, who have piled into local

equities amid a rand which is

strengthening all the while, which

benefits them as well.

The market is really only looking for a

slight rise to around 96.6, but if a number

above 98 is forthcoming, this will be the

best BCI level seen since October 2015,

and will be a strong signal that

companies are becoming more inclined

to deploy some of that R1.5 trillion on

corporate balance sheets to hire more

and invest in new or improved capital.

Figure 3: SACCI BCI since 2010 (source:

SACCI)

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Wednesday February 7 08h00: SA Foreign

Exchange Reserves for January

South Africa's gross foreign reserves

unexpectedly rose to US$50.722 billion in

December 2017 from US$50.297 billion a

month earlier, beating market

expectations for an amount of US$48.84

billion. December’s figure was the highest

since January 2013. The increase of

US$425 million in the gross reserves

reflected matured foreign exchange

swaps conducted for liquidity

management, the depreciation of the US

dollar against most currencies and the

increase in the US dollar gold price. These

factors were partially offset by foreign

exchange payments made on behalf of

the government.

In January, the USD slipped over 2%

against the ZAR and we therefore expect

to see a moderate rise in reserves even

off a very high base, to approximately

US$51 billion.

Thursday February 8 11h30: SA Mining

Production for December

We favour the year-on-year figure, as the

monthly movements are quite volatile,

and depend on base effects.

Mining production increased 6.5% year-

over-year in November, following a 5.2%

gain in the previous month and well above

market expectations for a rise of 4.9%. On

a monthly basis, mining output went

down 0.7%, after a 2.7% increase in

October. Annually, output advanced at a

faster pace for coal (plus 8.5 % compared

to 6.2% in October), PGMs (+12.3% vs.

0.6%) and iron ore (+20.7% vs. 17.9%). In

addition, production fell less for diamonds

(minus 4.6% compared to minus 6.9%).

Meanwhile, output rose at a decelerated

pace for other non-metallic minerals

(+11.6% vs. +19.9%), manganese ore

(+3.4% vs. +20.2%) and chromium (+1.8%

vs. +9.8%). Also, production decreased

further for gold (-8.3% vs. -0.5%) and

building materials (-5.8% vs. -1.5%).

Metal prices advanced further in

December, and we expect at least a 3.3%

monthly increase in mining output in

December, and specifically a 3.5%

expansion in gold production. The annual

increment is likely to be close to 5.0%.

13h00: SA Manufacturing Production

Manufacturing production increased 1.7%

year-on-year in November 2017, slowing

from an upwardly revised 2.3% rise in the

previous month and above market

expectations for expansion of an annual

0.45%. Output advanced at a slower pace

for food and beverages (+6.0% vs. +7.4%),

basic iron and steel and metals &

machinery (+4.6% vs. +5.6%) and motor

vehicles and transport equipment (+1.6%

vs. +2.7%). In addition, production fell for

glass and non-metallic minerals (minus

0.3% compared to plus 3.8%) and

decreased faster for wood and wood

products, paper, publishing & printing (-

1.2% vs. -2.6%), clothing & footwear (-

4.2% vs. -3.2%) and electrical machinery (-

7.2% vs. -1.4%). Also, output for

petroleum, chemical products, rubber and

plastic declined at the same pace as in

October (-0.7%). On a monthly basis,

manufacturing rose 0.9%, after a 0.8%

increase in the prior month.

Manufacturing is improving slowly off a

very low base, and is presently not

contributing to GDP growth, which is

being driven by agriculture and agri-

processing as drought effects dissipate,

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and metals and mining, with commodity

prices remaining elevated. We expect

manufacturing output to inch up around

0.2% to 0.3% for an annual gain of under

1.0%. Little to no market impact.

Gideon Pimstone

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economic calendar - amazon web services...in 2018, the us dollar had its worst start to a calendar...

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