Chart of the Week : OECD private sector confidence
Head of Macro Analysis
Summary: Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance.
Click here to download this week's full edition of Macro Chartmania.
The below chart about OECD private sector confidence perfectly summarizes the macro picture at the end of 2020 characterized by a strong divergence between manufacturing confidence and consumer confidence. As soon as the global lockdown from last Spring was lifted, confidence in the manufacturing sector has strongly rebounded, mostly fueled by China’s economic rebound, improved global trade outlook and supply chain recovery. In November, the index was slightly below the 100 threshold (a figure above 100 indicates optimism for the future) with the year-on-year rate increasing by 0.2%. Based on more up-to-date manufacturing indicators from the United States and the EU, the recovery in the manufacturing sector is certainly not over yet. In December, the UK manufacturing PMI index was out at 57.5, versus 55.2 in the Eurozone. Meanwhile, in the United States, durable goods orders are almost back to pre-crisis level. We thus expect that the OECD manufacturing sector index will climb above 100 in coming months. In contrast, the picture for consumer confidence was still gloomy in year-end and there is little sign of improvement in the near term. The recovery has also started when the global lockdown was lifted but, in that precise case, it was short-lived due to unemployment concerns and the re-imposition of restrictions, with the index falling again in November at 98.4. The year-on-year rate is also negative, with a sharp drop of minus 2.1% in the last print. What we have learnt in previous years is that consensus often breaks in the first weeks of new year, and this is likely to be proved right in 2021 again. While many economists expected in their 2021 forecasts a strong rebound in consumer confidence on the back of positive vaccine news, this scenario is unlikely to unfold in the coming months. With the near term reality of lockdowns back in fashion (strict lockdown in the UK, extension of lockdown in Germany until the end of this month, Canada mostly in lockdown, emergency situation in Tokyo etc.), it is highly probable that consumer confidence will keep falling in the next two to three months and will probably reach levels last seen in Spring 2020. In terms of economic data, it is not certain that investors are ready to very rough Q1 global indicators. With the sharp drop in mobility data we observe, especially in Spain, the United Kingdom and Italy, we consider that several European economies could fall into recession in the first part of the year. What was once unimaginable is becoming plausible once again.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)