In its first estimate of GDP, the BEA assumed a brisk pace of inventory building in the fourth quarter. Today’s business inventories report suggests the initially-reported 0.8 percent boost may be revised lower.
Slower Inventory Build as Sales Slump
- The 0.1 percent increase in business inventories for December was smaller than the 0.2 percent gain that had been expected by the consensus.
- Sales were weak across the board in December, with manufacturers reporting a monthly sales decline of 1.1 percent and retailers posting a similar drop. In a separate report this morning, we learned that January retail sales fell again.
Q4 Inventory Build Not Entirely Intentional
- Consumption spending was strong in the fourth quarter, but equipment spending fell modestly. So is the inventory build intentional as consumer-oriented businesses stock up? Or is it unintentional as businesses were caught flat footed by the cutbacks in equipment spending? The inventory-to-sales figures showed increases across the board, which suggests at least some of the inventory build was unintended.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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