Continuing with surprises, economic surprise indices – measures of how surprised economists are that their forecasts were wrong – are showing that China is returning to a period of growth that largely matches where economists think it should be. Historically this really is a surprise, and contrasts with most other G10 economies which are releasing data better than forecast, and typically are subsequently being revised higher. This trend is not a surprise unless you are an economist.
The week closed with US payrolls data, which was better than expected, no surprise (pun intended). It printed at 379k vs 200k f/c, or 2 standard deviations away for the more accurately minded. To emphasise the current significance of the most important data print of the US economics calendar, the rates market completely ignored the miss and focused on the sentiment of the equity markets for the remainder of the session.
In a spectacular display of central bank communication, Kuroda of the BoJ signalled further discussion was needed regarding extending the band of the 10yr YCC, then in less than 2.5hrs announced that such a widening was not necessary. This led to some confusion and volatility in the JGB bond market, which it is not used to.
US: Feb ISM data was stronger than expected. Feb nonfarm payrolls +379k (200k exp., 49k prev.), private Payrolls +465k (200k exp., 6k prev.) and the unemployment rate dropped to +6.2% (6.3% exp., 6.3% prev.)
Canada: Feb Canadian Manufacturing PMI was expansionary and 4Q GDP annualized at 9.6% (7.3% exp., 40.5% prev.)
Eurozone: Feb Core CPI dropped to +1.1% YoY (1.1% exp., 1.4% prev.) Jan unemployment rate dropped to +8.1% (8.3% exp., 8.3% prev.) and retail sales reflected restrictions dropping -5.9% (-1.4% exp., 2.0% prev.) German CPI printed +0.6% MoM (0.5% exp., 1.4% prev.) leaving the YoY measure unchanged. Retail sales reflected restrictions at -4.5% MoM (0.3% exp., -9.6% prev.) and unemployment was stable. Italian Feb CPI -0.2% MoM (-0.4% exp., -1.1% prev.), PMIs were weak and retail sales reflected restrictions dropping -3.0% MoM (-0.5% exp., 2.5% prev.)
Sweden: No tier 1 data.
Norway: Norwegian Jan retail sales -0.1% MoM (-5.7% prev.) and the manufacturing PMI was strong. Swedish PMs were all very strong.
Jan Jobless rate improved to +2.9% (3.0% exp., 2.9% prev.)
No tier 1 data.
Australia: The RBA met and kept it cash and 3y policy rates unchanged at 0.1% (0.1% exp., 0.1% prev.) and emphasised its preparedness to do more QE.
Feb measures of inflation were stable but low and 4Q GDP +3.1% QoQ (2.5% exp., 3.3% prev.) resulting in a very respectable -1.1% YoY (-1.9% exp., -3.8% prev.)
New Zealand: No tier 1 data.
For further information on the Pacific G10 Macro Rates team, their experience and strategy please see below