The October German industrial production print boosted hopes that a recession in the Eurozone may be milder than previously anticipated. Industrial production fell -0.1% m/m in October, better than consensus expectations of a -0.6% fall on the month. In addition, September IP growth was revised up to 1.1%, from an initial reading of 0.6%. The October print was however buoyed by the contribution of the construction sector, which rose 4.2% m/m, and can be volatile.
Saudi Arabia has approved a budget of SAR 1.114tn for 2023, with a projected surplus of just 0.4% of GDP down from an official estimate of 2.6% of GDP this year. Our analysis suggests the budget is based on an oil price forecast of around USD 75/b, well below our house forecast of USD 105/b for next year. Spending is budgeted to decline by 1.5% y/y next year after rising 9% in 2022. The Ministry of Finance expects GDP growth to slow to 3.1% in 2023 from an estimated 8.5% in 2022.
The Bank of Canada raised rates by 50bps yesterday, consistent with expectations. This is the sixth consecutive rate rise by the bank and takes the Canadian overnight interest rate to 4.25%. Language used in the bank’s statement suggested that further large increases had likely come to end, at least for the moment.
Reports on Bloomberg suggested that Chinese officials are debating setting a 5% growth target for 2023. The initial 2022 growth target of 5.5% was largely abandoned in the face of ongoing Covid19 restrictions and a property sector slump this year, so a 5% target for 2023 would indicate a renewed focus on economic growth after several years of Covid-zero policies, and would be consistent with a recent easing in Covid-19 restrictions and the November announcement of a support package for the embattled property sector. The Chinese trade balance deteriorated by more than expected in November, falling to USD 69.84bn from USD85.15bn in October. There was significantly weaker than expected import and export growth in November, falling 10.6% y/y and 8.7% y/y, respectively, underscoring the need for a rebound in domestic demand to bolster economic growth.
China’s President, Xi Jinping, started a state visit to the kingdom of Saudi Arabia on Wednesday. The two countries are due to sign agreements that seek to harmonize China’s Belt and Road Initiative with Saudi Arabia’s own Vision 2030 development plan.
US mortgage approvals fell by 1.9% w/w in the week ending December 2, this is after a -0.8% w/w fall the week before. Notably approvals fell even as the mortgage interest rates declined, with the rate on a 30-year fixed mortgage falling 8bps to 6.41%.
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