Daily macro update

US: Initial jobless claims (Dec.14): 220k vs 230k expected (prior: 242k)

• Continuing claims: 1874 k after 1879 k the prior week.

US: Philadelphia Fed. (Dec.): -16.4 vs 2.8 expected (prior: -5.5)

• Business sentiment has decreased after small improvement the prior month; opinions have decreased on new orders and shipments, while unfilled orders have increased; views on employment remained positive but have moderated. Prices paid have increased while selling prices have moderated.
• The 6-month index remained positive, but it has moderated with lower new orders and shipments.
• This surprising decline in index could be related to specific concerns in this industrial region but also rising concerns about the future trade policy that could impact the manufacturing sector; this regional data also illustrates the large gap existing between services and the manufacturing sector, not solved after elections.

US: GDP (Q3-24): 3.1% q/q vs 2.8% expected (prior: 3.0%)

• Final data for Q3 GDP were modestly revised up, thanks to less negative trade contribution and a firmer consumption of services from past estimates.
• Consumption was up by 3.7% q/q (goods up by 5.6% q/q and services up by 2.8% q/q); investment in equipment was strong (10.8% q/q) and R&D up by 3.1% q/q, while structure was down by 5% q/q and residential down by 4.3% q/q.
• Public consumption was also sustained, up by 5.1% q/q after 3.1% in Q2.
• Net trade contribution was negative (-0.43 pp vs 0.14 pp in Q2) and inventories have declined, contributing negatively to growth (-0.22 pp in Q3 after -0.11 pp in Q2).
• Growth of private domestic demand was up by 3.4% q/q after 2.7% q/q in Q2-24.
• A future reflation policy will maintain growth trend at a high level, and probably above its potential.

US: Existing home sales (Nov.): 4.15M vs 4.09M expected (prior: 3.96M)

• Sales of condos were up by 2.6% m/m and those of single-family houses were up by 5% m/m.
• Inventories have decreased over the month; prices were up by 4.7% y/y (4.8% y/y for single family houses).
• First-time buyers have come back strongly while share of investors was down over the month in total sales.

UK: The BoE remained on hold with rates at 4.75%.

• The bank maintained its key rates at 4.75% but the vote was split with 3 governors in favour of another cut and 6 to stay on hold.
• The strategy remained to pursue gradual easing, but the agenda is less clear according to Governor Bailey. Labor looks more balanced, but wage growth has picked up as well as inflation recently after a downward trend. Growth is expected to be flat in Q4 according to the BoE and uncertainties have increased related to trade policy.
• The bank will have to navigate between two-sided risks: downside risks on growth versus upside risks on inflation due to higher taxes and resilient services/wages. It will adopt a cautious stance and a very gradual easing in 2025 to a probable 4% terminal rate.

France: Business confidence (Dec.): 94 vs 96 expected (prior: 96)

• Business confidence remained on a downward trend, but the fall is contained. Sentiment in manufacturing remained surprisingly stable over the month.
• Opinions have deteriorated on production (past and future) and domestic orders remained depressed: some improvement was seen in foreign orders while domestic orders have decreased. Sentiment has also decreased on employment.
• Climate remained uncertain due to headwinds from politics and uncertainties on taxes in 2025.

Germany: GFK consumer confidence (Jan.): -21.3 vs -22.5 expected (prior: -23.1 revised from -23.3)

• Consumer sentiment has slightly improved over the month but remained depressed.
• Views on inflation and purchasing power were less negative over the past month, but willingness to buy remained at depressed levels, pointing for preference for saving.

Poland: Industrial production (Nov.): -5.4% m/m vs -6.1% expected (prior: 9.9% revised from 10%)

• Activity has contracted after the large rebound seen the prior month; all sectors were down over the month except electricity.

Sweden: Riksbank has cut its key rates by 25 bp from 2.75% to 2.50%.

• The bank expects a 2.1% GDP growth in 2025 and inflation to remain around 2% (CPIF index).
• Other rate cuts are expected in Q1-25.

Switzerland: Trade balance (Nov.): 5.42 Bn CHF (prior: 8.03Bn)

• Real exports were down by 10.8% m/m vs 11.4% m/m prior month; real imports were down by 2.8% m/m after 0.9% m/m the prior month.

US: Housing starts (Nov.): 1289k vs 1345k expected (prior: 1312k revised from 1311k)

• Housing have declined due to a fall in multifamily houses over the month (-23% m/m) while starts of single-family houses have slightly increased, from 95 k to 1011k. While activity in South has rebounded after the hurricanes, activity has declined in North (Northwest, Midwest, and West) districts over the month.
• Building permits were up from 1419 k the prior month to 1505 k; a rebound was seen in permits for multi-family houses, which suggests the fall seen in Nov. housing starts was only temporary.

Eurozone: CPI (Nov.): -0.3% m/m as expected (prior: 0.3%)

• Final data confirmed the monthly decline in prices; services have declined by 0.9% m/m (flat the prior month; 3.9% y/y), while energy (0.5% m/m) and food prices (0.2% m/m) were higher.
• Prices of manufactured goods were flat after 0.7% m/m prior month; core inflation was down by 0.6% m/m after 0.2% m/m the prior month.
• Yearly trend in inflation has reaccelerated to 2.2% y/y after 2% y/y the prior month, due to base effects on energy prices; core inflation remained stable at 2.7%. A slower tend is necessary for the ECB to accelerate its adjustments on key rates.

UK: CPI (Nov.): 0.1% m/m as expected (prior: 0.6%)

• Prices have moderated on a monthly basis but trends across sectors have shown large divergence; prices have accelerated on food-alcohol and were still sustained on clothes (0.6% m/m after 1.1% m/m prior month).
• On the opposite, prices have declined over the month for household goods, transport, and communication. Services were down by 0.1% m/m after -0.4% m/m the prior month due to lower transport costs.
• Yearly trend has accelerated from 2.3% y/y the prior month to 2.6% y/y, and it remained stable at 3.5% y/y on core inflation.
• These data should justify the BoE to remain on hold on its next meeting.

UK: PPI Input prices (Nov.): 0% m/m vs 0.2% expected (prior: 0.1%)

• A modest decrease on fuel prices over the month.
• Yearly trend has turned less negative on base effects, from -2.4% y/y the prior month to -1.9% y/y.

UK: PPI Output prices (Nov.): 0.3% m/m vs 0.2% expected (prior: -0.1% revised from 0%)

• Prices of coke, oil and food were more sustained over the month.
• The yearly trend has turned less negative at -0.6% y/y after -0.9% y/y prior month.

US: Retail sales (Nov.): 0.7% m/m vs 0.6% expected (prior: 0.5% revised from 0.4%)

• Ex auto and gasoline: 0.2% m/m vs 0.4% expected (prior: 0.2%, revised from 0.1%)
• Core retail sales ("control group") rose by 0.4% m/m in November, in line with expectations (after a 0.1% decline in October).
• Auto sales rose 2.8% and gasoline station sales rose 0.1%, while food services sales declined 0.4%.
• This confirms that private consumption remains solid in Q4.

US: Industrial production (Nov.): -0.1% m/m vs 0.3% expected (prior: -0.4% revised from -0.3%)

• Industrial production unexpectedly declined in November with capacity utilisation down to 76.8% from 77.0%.
• This negative print (for a third consecutive month) is explained by weaker utility output and mining.
• Manufacturing production was up 0.2% but below expectations (0.5%) even though October's data was revised down to -0.7% (from -0.5%).
• The manufacturing sector continues to struggle amid high borrowing costs domestically and a sluggish export market.

US: NAHB housing market index (Dec.): 46 vs 47 expected (prior: 46)

• The headline index was unchanged in December, but home builders' outlook for the next 6 months increased to the highest level since April 2022. According to the NAHB, they are anticipating future regulatory relief following the election.
• However, home builders continue to express concerns about high interest rates, elevated construction costs and a lack of buildable lots.

Germany: IFO (Dec.): 84.7 vs 85.5 expected (prior: 85.7)

• Current assessment: 85.1 vs 84.0 expected (prior: 84.3)
• Expectations: 84.4 vs 87.5 expected (prior: 87.0)
• The headline index fell to its lowest level since May 2020 while the expectations component fell to the lowest since last January, which may reflect worries about potentially upcoming tariffs.
• Sentiment declined in all sectors except for construction, which reported better current business. Manufacturing firms reported weaker current business, and became more pessimistic in their outlook given declining orders. In services, weakness mainly reflected weaker expectations, while current conditions benefited somewhat from seasonal demand.

Germany: Zew (Dec.): 15.7 vs 6.9 expected (prior: 7.4)

• Current situation: -93.1 vs -92.6 expected (prior: -91.4)
• The press release mentions expectations for an investment boost due to the snap elections and lower ECB policy rates.

UK: Unemployment rate (ILO) (Oct.): 4.3% as expected (prior: 4.3%)

• The unemployment rate remained steady in October, but payroll employment fell by 35k in November (vs -10k expected), which is the largest decline since 2020.

UK: Average earnings incl. Bonus (Oct.): 5.2% y/y vs 4.6% expected (prior: 4.3%)

• Despite a cooling labor market, the rise in average earnings rose to a three-month average of more than 5%, which was much stronger than expected and the trend appears to continue in November.
• Wage growth is more sustained than BOE's forecasts and suggests that inflation is more entrenched than expected, which is likely to mean higher interests for longer.

US: Services PMI (Dec P): 58.5 vs 55.8 expected (prior: 56.1)

• US services activity saw its largest expansion in over three years, underscoring a significant divergence from the manufacturing sector, which continued to contract, according to preliminary estimates.
• The increase in output, new orders, and optimism surrounding the incoming Trump administration raised the services PMI to its highest level since October 2021.
• Conversely, the manufacturing sector's PMI fell to 48.3 in December from 49.7 in the previous month, missing market expectations for a slight improvement to 48.9.
• New orders for manufacturers continued to decline, and employment growth slowed compared to the prior month. Rising costs for raw materials added to inflationary pressures in the sector. Looking forward, manufacturers expressed concerns about ongoing weak demand and increasing input prices, attributing their pessimistic outlook to potential tariff threats from the Trump administration.
• The composite PMI rose to 56.6 in December from 54.9 in November.

US: Empire manufacturing (Dec): 0.2 vs 10.0 expected (prior: 31.2)

• The Empire State Manufacturing Survey indicated that manufacturing activity in the New York region decreased in early December following a surge in November.
• Growth in new orders and shipments slowed, and there was a slight contraction in employment.

Eurozone: PMI Manufacturing (Dec P): 45.2 vs 45.3 expected (prior: 45.2)

• The eurozone's flash manufacturing PMI is still in contraction territory at 45.2, reflecting a continued drop in new orders that has pushed the production component to its lowest level in a year. Additionally, decreasing input costs indicate a potential reduction in inflationary pressures, which may enable manufacturers to lower selling prices for customers.
• France (41.9 vs. 43.1 prior) and Germany (42.5 vs. 43.0 prior) contracted further according to the preliminary estimates.

Eurozone: PMI Services (Dec P): 51.4 vs 49.5 expected (prior: 49.5)

• The eurozone private sector contracted less than expected in December, with a PMI of 49.5 compared to the anticipated 48.2, largely due to a stronger-than-expected performance from the services sector.
• Improved optimism for the 12-month outlook contributed to the increase in the services sector, despite a continued decline in new orders at a steady pace. Job growth remained stagnant, while both input and output prices accelerated.
• Preliminary data suggests that the overall drop in business activity was driven by contractions in Germany and France, the eurozone's largest economies. The rest of the region saw solid output growth.

UK: PMI Services (Dec P): 51.4 vs 51.0 expected (prior: 50.8)

• The flash PMI data for December show that the UK economy remained largely stagnant at the end of 2024 (50.5 vs. 50.6 expected), indicating a notable loss of growth momentum compared to earlier in the year. Like the eurozone, the expansion in the services sector helped offset another contraction in manufacturing, which registered a PMI of 47.3, falling short of the expected 48.5.
• The services sector's recovery was fueled by rising business activity and a reduction in backlogs, with minimal operational pressure. However, service providers experienced a significant drop in employment at year-end.
• In manufacturing, the PMI declined to 47.3 in December from 48 in November, below the forecast of 48.2. This marks the largest contraction in the sector in eleven months, as production fell for the second month in a row and new orders decreased sharply.