US DATA: U.Mich Consumer Sentiment Improves But Conditions See Fresh Series Low
Dec-05 16:03
U.Mich consumer sentiment was higher than expected in the preliminary December release, as better expectations offset disappointing current conditions. It was supported by lower inflation expectations but we continue to caution reading too much into these preliminary results.
- Consumer sentiment increased to 53.3 in December (cons 52.0) from 51.0 after what had been its lowest since Jun 2022 which in turn was the lowest on record.
- Current conditions fell further to 50.7 (cons 52.1) from 51.1 for a fresh series low, whilst expectations increased 4pts to 55.0 (cons 52.7).
- From the press release on improved expectations: "Still, December’s reading on expected personal finances is nearly 12% below the beginning of the year. Similarly, labor market expectations improved a touch but remained relatively dismal. Consumers see modest improvements from November on a few dimensions, but the overall tenor of views is broadly somber, as consumers continue to cite the burden of high prices."
- 1Y inflation expectations surprisingly dipped from 4.5% to 4.1% and 5-10Y inflation expectations dipped from 3.4% to 3.2%, both their lowest since January.
- However, with 517 responses in the preliminary survey period, we imagine there will be more than double this come the full release on Dec 19 and results have recently appeared susceptible to when people of differing political affiliation have responded.
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EUROZONE DATA: Euro-Coin Growth Nowcasts Remain Cautiously Optimistic
Nov-05 15:55
- The Bank of Italy’s Euro-coin indicator, which provides a nowcast for Eurozone trend growth, was almost unchanged in October at a firm 0.49 (vs 0.48 in September). The press release notes that “the indicator was affected by the weakness in industrial activity, while it was boosted by improved confidence among households and firms”.
- The trend growth series strips out seasonal variations, measurement errors and short-run volatility, and has been in positive territory for the last 20 months.
- As for alternate growth tracking, Bloomberg’s GDP Nowcast has started Q4 tracking on a very strong note at 0.6% Q/Q for real GDP growth. That does however closely tally with the experience at the start of Q3 tracking before it gradually faded to 0.3% in late October ahead of the Q3 advance release (which still then overestimated growth which came in at 0.2% Q/Q).
- Instead, Bloomberg analyst consensus is currently 0.2% Q/Q for Q4, after its 0.1% estimate for Q3 undershot the advance 0.2%. The ECB's September projections penciled in real GDP growth of 0.2% Q/Q in Q4 after being overly pessimistic with their Q3 forecast of 0.0%.
US: Thune Says No Votes To Terminate Filibuster, Shutdown Pessimism Surges
Nov-05 15:54
Senate Majority Leader John Thune (R-SD) told reporters there is insufficient Republican support to terminate the Senate filibuster, after President Donald Trump urged the move at a White House breakfast this morning. “I know where math is on this issue in the Senate. It’s just not happening,” Thune said Semafor.
- Thune's comments appear to close one possible path to ending the government shutdown. It is unclear whether a dozen reported Democratic senators are still weighing up a three-pronged plan to reopen the government in light of yesterday's 'blue wave' election results, the other offramp out of the shutdown.
- Schumer and House Minority Leader Hakeem Jeffries (D-NY) penned a letter to Trump earlier today demanding a meeting to discuss a healthcare deal to reopen the government. The combative tone of the letter, including the use of Trump's sign off "thank you for your attention to this matter," suggests Democratic leadership believe the election result has significantly bolstered their shutdown leverage.
- The pair wrote: "Dear President Trump: We write to demand a bipartisan meeting of legislative leaders to end the GOP shutdown of the federal government and decisively address the Republican healthcare crisis... Thank you for your attention to this matter."
- Trump's closed-door comments this morning also appear to validate Democrats' negotiating position: "Trump said the election results showed that the shutdown has been “worse for us than for them” & that R’s “are getting killed,”" per Punchbowl.
- Data from Polymarket shows some positive sentiment has receded, with the implied probability of Nov 16+ shutdown end date surging.
Figure 1: Government Shutdown End Date
Source: Polymarket
STIR: Closer To 5bp Of Easing Priced For Tomorrow's BoE After U.S.-Driven Move
Nov-05 15:46
Movements in the USD front end (driven by ADP data, the Treasury’s QRA and ISM services survey) have spilled over into GBP markets.
- SONIA futures now 0.75-6.5 lower, leaving SFIZ6 10.0 off October’s high.
- BoE-dated OIS now 1.5-5.0bp less dovish on the day, showing 5.5bp of easing for tomorrow, 15bp through year-end and 28bp through February.
- For tomorrow’s decision we have characterised our view as 50/50 (when it comes to a cut or a hold), which is comfortably more dovish than current market pricing.
- We would have more confidence in a cut if the Budget was not coming into view, particularly given the soft food CPI reading in the latest monthly inflation release.
- Our full preview of the decision is here.
| BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
| Nov-25 | 3.916 | -5.4 |
| Dec-25 | 3.820 | -14.9 |
| Feb-26 | 3.691 | -27.8 |
| Mar-26 | 3.639 | -33.0 |
| Apr-26 | 3.536 | -43.4 |
| Jun-26 | 3.508 | -46.2 |
| Jul-26 | 3.448 | -52.1 |
| Sep-26 | 3.433 | -53.7 |
