Macroeconomics: The Day Ahead for 22 December

What looks to be quite a busy schedule of data and some CEE/EM rate decisions is upon closer inspection rather thin, though US Consumer Confidence and Existing Home Sales will be watched closely, above all as both have a long history of generating outliers (relative to forecasts). On the central bank front, Thailand’s BoT kept rates unchanged as was very widely expected, while both Czechia’s CNB (+75 bps) and Paraguay’s BCP (+100-125 bps) are seen delivering further aggressive rate hikes, again underlining the degree of divergence between DM and other central banks in the ‘fight’ against inflationary pressures. The downward revision to UK Q3 GDP highlights just how much momentum was lost in Q3, though the upward revision to Private Consumption (2.7% q/q from 2.0%) was encouraging, and the upward revisions to y/y readings highlight that much of the Q3 revision was due to an even stronger Q2. This is in any case just a matter of historical record, which has no implications for BoE policy going forward, or to what the immediate impact of the Omicron variant will be on Q4 and Q1 GDP, which is more material from a market perspective. But in thin holiday trading conditions, hallmarked by spikey volatility, it will be news related to the Omicron Covid variant which will remain front and centre, along with the ongoing woes of the European gas and power sectors, though as has been the case for a very long time, negative real interest rates will continue to put a floor under, and indeed drive flows towards, riskier assets.

U.S.A. Dec Consumer Confidence/ Nov Existing Home Sales

Consumer Confidence is seen edging back up to 11.0 from 109.5, but remaining in the range of recent monthly headline readings, though the details highlight how this reflects a big tussle between a strong labour market (Labour Differential at its all-time high of 46.9 in November – see chart) and pressure on household finances from high inflation (Nov 1-yr Inflation expectations jumping to 7.6% from 7.1% and 6.5% in preceding months). The latter in turn is weighing on home, car and other major purchases intentions, though not to the extent reflected in the much more down at heel Michigan Sentiment confidence measure, which takes little account of labour market conditions. As for Existing Home Sales, a solid increase in Pending Home Sales predicates the consensus for a 3.0% m/m increase to a very robust 6.53 Mln SAAR pace, and given a seasonally favourable seasonal adjustment, the risks look to be to the upside, with low inventories and mortgage rates continuing to outweigh the obvious headwind of high prices and affordability.