Macro Weekly – Sensational

by: Han de Jong

  • November Ifo smashes the October record
  • US corporate investment spending strengthening
  • Korean consumers feeling increasingly confident
171124-Macro-Weekly.pdf (87 KB)

I have regularly used this commentary to express surprise about the increase in global growth momentum in recent months. While I have been on the optimistic side of the discussions about the global economy, confidence indices have constantly surprised on the positive side. The ‘soft data’ just kept strengthening, more or less across the globe. But the confidence indicators cannot continue moving higher. So when they are at multi-year, or even multi-decade highs, it is reasonable to expect them to weaken and discuss whether they will come down quickly or not. All such talk has been premature and recent data does not change that. The recent (somewhat meagre) crop of economic data from various countries actually suggests that growth momentum is still on the rise. I must admit, I am somewhat baffled, I cannot believe my eyes, I think it is sensational.

Ifo smashes October’s record

The authoritative German Ifo-index of business confidence reached its highest level since the 1960 in October. But the November reading smashed that record. The index rose from 116.8 in October to 117.5. There are two main sub-series: ‘expectations’ and ‘current conditions’. The expectations series is generally considered the more important one as it is forward looking. In November, the assessment of current conditions eased a little (124.4 versus 124.8 in October) and the overall index was driven higher by a jump in the expectations series: 111.0 versus 109.2 in October.

Eurozone Markit PMI takes a leap from already impressive height

The eurozone Markit PMI series, measuring business confidence for the eurozone as a whole, also showed a further rise in November. The series for the manufacturing sector was particularly impressive. This confidence measure increased from al already high 58.5 in October to 60.0 in November, the highest since 2007, while the German sub series reached an all-time high. The jump in November for the eurozone was the biggest monthly rise I can trace back in my Bloomberg system. That is extraordinary as big jumps usually occur after steep falls, not from what was already a record level in October. The series for services was also strong.

National measures of business confidence in France were also impressive. INSEE’s business confidence index rose to 111 in November, up from 109 in October, the highest since 2007. The sub-series for the ‘production outlook’ reached its highest level on record.

I am aware that I can get a little carried away. And I realise that this is all ‘soft data’. Nevertheless, I think this data is sensational. It suggests economic momentum in the eurozone continues to build and it increases the chances that 2018 will also be a good year for economic growth.

US data more mixed, but with strong undertone

US data was more mixed in recent days. On the positive side, the Chicago Fed National Activity Index, which is a composite of 85 other economic variables, rose to its highest level since 2012. I must admit, however, that this series is volatile.

US durable goods orders were weak in October, falling 1.2% mom, but they had risen 2.2% in September. Non-defence, ex air capital goods shipments (which feeds into the national accounts for investment spending) rose 0.4% mom, after +1.2% in September. They have risen a cumulative 6.1% in the first ten months of the year, having fallen 0.7% in 2016. Clearly, investment spending has picked up. This is good for the cyclical outlook as more investment creates jobs and incomes, and, more importantly even, makes it likely that productivity gains will strengthen.

According to the University of Michigan gauge, consumer confidence eased somewhat in November: 98.5, versus 100.7 in October. However, the final November reading was clearly higher than the preliminary reading of 97.8 released earlier.

Korean consumers more upbeat

Not too many macro data was released in the key economies in Asia in recent days. South Korea released trade data for the first 20 days of November. Both export and import growth accelerated. That was not a big surprise as October had been weak, apparently due to holidays in the region. Export growth improved from 6.9% yoy in October to 9.7%, while imports were up 14.0% yoy after 3.1% in October. These are clearly strong numbers, but they are weaker than before October. We must bear in mind that the yoy-comparisons are becoming more challenging due to base effects.

Korean consumers are feeling increasingly confident. Their mood had been depressed late last year due to financial difficulties at one of the largest shipping companies and political uncertainty. But consumer confidence has risen since early this year and in November reached its highest level since 2010.


All in all, I think all this data suggests that economic momentum around the globe is strong and even strengthening at the margin. It is nothing short of sensational in my view.