Meny Macro Weekly Macro week 48 by #1 Chief Economist Harald Magnus Andreassen, and Macro Analyst Tina Norden Last week Omicron: Heaven or hell? Very likely, the new virus variant is significantly more contagious than the previous variants, and it will soon become dominant most places, just like the more transmissible variants have become until now The Omicron virus has already spread very rapidly in South Africa and it is already found in a large number a countries We do not yet know how much immunity present vaccines or earlier infections will give vs the Omicron. Many of those now being infected are reported to have been vaccinated (but South African physicians say that unvaccinated young people are over-represented among those with symptoms) Even more important, we do not know whether those infected with Omicron get more or less ill or will become more or less dependent on hospital care/treatment or will experience a higher Case Fatality Rate than after being infected by the previous variants, neither for the vaccinated nor the unvaccinated However, most experts still believe vaccines at least will reduce sickness, if infected South African health experts (who may want to play down the consequences) report that Omicron symptoms are ‘extremely mild’ (main symptoms being sore muscles, and tiredness at day or two and some have a slight cough) but no research is yet conducted It seems likely that Merck’s and Pfizer’s treatment ‘pills’ will effective vs lung illness also vs. the Omicron version The coming few days (or 1 – 2 weeks) should yield extremely important information on how harmful the Omicron variant is – is it ‘extremely mild’ or does this variant create sickness/deaths like the previous variants or even worse? 3 possible scenarios: The best case: We will ‘all’ be infected but very few do get really sick – while those infected with Omicron also gains immunity vs the other variants. If so, we will soon win the fight against the Covid! A bad case: Vaccines/earlier infections yield some immunity vs Omicron and reduces illness, but as Omicron is far more transmissible and if health consequences are in line with the Delta variant’s, serious challenges in the health systems, of which some are already under pressure. A substantial increase in social distancing will be needed to prevent a breakdown a health crisis. It will take time to for the virus to burn through the population. Bad for the economy & most markets (and probably more than what is priced in Monday morning, following the partial recovery so far) The ugly case: The new variant spreads like a wildfire, and those infected get really sick – and it will take time to develop good vaccines (Moderna says they can deliver in early 2022, but if Omicron is really contagious, time is critical). A nightmare, of course. Some very hard choices will have to be made – and many people will decide themselves – by self isolating. Economic & market consequences will be substantial, at least for some months On the Delta variant The majority of countries are still reporting more cases – but growth slowed somewhat last week, also in Austria and the Netherlands, which introduced harsh restrictions one week ago (and Netherlands tightened their measures at Friday) Hospitalisation have increased further in most countries – and now even in the US and in the UK – but outside Eastern Europe, not a any health crisis (yet). Austria and Netherlands have introduced harsh restrictions in order to get control, and milder measures are introduced most other places Mobility is so far close to stabile at high levels in the West, and as the virus is on the retreat in most countries in the Asia, mobility is normalising here too, which should ease supply chains problems stemming from this part of the world. Until the Omicron arrives… The Economy Preliminary November PMIs PMI data sets were in sum better than expected – due to upticks in both EMU and Japan, while US services surprised somewhat at the downside. Our estimate for a small uptick for the global composite PMI signals growth well north of 4%. Delivery times may have peaked but price inflation is still accelerating USA The minutes from the FOMC were more hawkish than we thought chair Powell sounded at the presser following the early November meeting. (He was applying for a re-nomination??) According to the minutes, many members of the FOMC raised their concerns regarding inflation, paving the way for speeding up tapering in December (now - if Omicron do not hit too hard) Q3 GDP was revised marginally upwards to 2.1%, no important details changed. However, corporate profits rose further to the best level ever/or in decades. We still think ‘the end is near’ for the profit cycle, as the labour market is too tight for the corporate sector to keep the profits rate at present levels. So far, they have solved the problem by hiking their prices at the fastest pace in 3 decades but we very much doubt that is a sustainable solution Personal spending grew rapidly in October too, and much more than the income – and the savings rate fell to below the pre-pandemic level but the Wall of Money saved through the pandemic is still intact (equals 13% annual income). Spending on services are still below par, goods far above The consumption price deflator (PCE) confirmed the high monthly inflation in October reported by the CPI, putting even more pressure on the Federal Reserve Export volumes climbed 10% in October, and the trade surplus in goods shrank substantially. No details yet The number of new jobless claims fell to a record low level last week – which do not weaken the impression of a very tight labour market EMU Consumer confidence fell slightly in November very likely due to the Delta challenges No credit boom: Corporate credit growth has gained some speed recent months, but growth is still moderate, as for households Sweden The Riksbank signals that the signal rate will be hiked. In Q4-24. Markets were ‘disappointed’ but still discount in first hike in late 2022 or early 2023 Norway The LFS (AKU) unemployment rate fell much more than expected in September, by 0.4 pp to 3.6%. Employment grew further, while the participation rate fell marginally (and it has flattened since the summer). The strong labour market is confirmed by a further strong growth in the no. of employees (payrolls, a-ordningen) in October – now up 1.4% vs. the pre-pandemic level, and by 2.1% with permanent stay in Norway Retail sales rose in October, we expected a small decline. The trend is still down. Opinion’s consumer confidence index fell sharply in November, and it seems strange that the Delta virus should get the blame. But what else?? Hotel guest nights were much higher than we expected in October, up 1% vs. the 2019 average. Norwegians guest nights are up 18%, due to much higher recreational traffic than normal. Even the conference market is back to normal! Total revenues are up 4% vs. 2019 This week: Omicron + PMI/ISM, US payrolls, Norwegian unemployment, house prices Omicron The ‘only’ important data point this week is obviously sickness/need for hospital treatment/care for persons infected with the new virus variant. So far, there are no indication that Omicron is more harmful than the Delta variant In fact, some South African researchers state that symptoms are ‘extremely mild’. It that is confirmed, one problem less – and if the Omicron is very easily transmissible and at the same time protects against the Delta variant, a quick fix for the whole pandemic! The alternative: Omicron is easily transmissible and even more, escapes current vaccines/earlier infections but at the same time just as harmful – or more harmful – than the Delta variant. If so, significantly more social distancing will take place, whether authorities say so or not! November (final) PMIs The preliminary PMI data sets from the rich part of the world signalled another small uptick. Emerging markets ex. China have reported much better PMIs recent months, and should continue upwards now. The Chinese PMIs are weaker than some months ago, but not yet weak. Global delivery times may have peaked (or at least the increase in delivery times) but prices are still accelerating! In the US, the focus will be at the ISM surveys. The service sector ISM was at record high level in October Auto sales Several countries report November auto sales this week but too few countries will have reported by next weekend to produce a global estimate USA Nonfarm payrolls growth is expected to be strong in November too (0.5 mill +), but the participation & unemployment rates as well as wage inflation are the really important data in the labour market report, as these data give the relevant data on labour market tightness. In addition, the NFIB (SMBs) will report hiring plans, if they are able to fill vacancies as well as wage plans. Following the drop to the lowest new jobless claims ever last week, check out the flow this week too We expect Fed’s Beige book to confirm decent growth, lack of labour and higher wage & price inflation EMU CPI inflation will very likely accelerate further in November, preliminary data out from today Unemployment is steadily falling, and has fallen to below the pre-pandemic level - as the vacancy rates has ‘exploded’, to the highest level ever. A further decline in the unemployment rate is expected in October Norway NAV open unemployment is rapidly on the way down, and we expect a further decline in November, especially among the partially unemployed House prices are appreciating at a slower pace, and interest rates are on the way up but the market is tight and we expect a small increase in prices in Nov too Macro week 48 report: Macro Weekly SB1 Markets 21-48.pdf Previous reports: Macro week 47 report: Macro Weekly SB1 Markets 21-47.pdf Macro week 46 report: Macro Weekly SB1 Markets 21-46.pdf Macro week 45 report: Macro Weekly SB1 Markets 21-45.pdf Macro week 44 report: Macro Weekly SB1 Markets 21-44.pdf Macro week 43 report: Macro Weekly SB1 Markets 21-43.pdf Macro week 42 report: Macro Weekly SB1 Markets 21-42.pdf Macro week 41 report: Macro Weekly SB1 Markets 21-41.pdf Macro week 40 report: Macro Weekly SB1 Markets 21-40.pdf Macro week 39 report: Macro Weekly SB1 Markets 21-39.pdf Macro week 38 report: Macro Weekly SB1 Markets 21-38.pdf Macro week 37 report: Macro Weekly SB1 Markets 21-37.pdf Macro week 36 report: Macro Weekly SB1 Markets 21-36.pdf Macro week 35 report: Macro Weekly SB1 Markets 21-35.pdf Macro week 34 report: Macro Weekly SB1 Markets 21-34.pdf Macro week 33 report: Macro Weekly SB1 Markets 21-33.pdf Macro week 32 report: Macro Weekly SB1 Markets 21-32.pdf Macro week 31 report: Macro Weekly SB1 Markets 21-31.pdf Macro week 30 report: Macro Weekly SB1 Markets 21-30.pdf Macro week 29 report: Macro Weekly SB1 Markets 21-29.pdf Macro week 28 report: Macro Weekly SB1 Markets 21-28.pdf Macro week 27 report: Macro Weekly SB1 Markets 21-27.pdf Macro week 26 report: Macro Weekly SB1 Markets 21-26.pdf Macro week 25 report: Macro Weekly SB1 Markets 21-25.pdf Macro week 24 report: Macro Weekly SB1 Markets 21-24.pdf Macro week 23 report: Macro Weekly SB1 Markets 21-23.pdf Macro week 22 report: Macro Weekly SB1 Markets 21-22.pdf Macro week 21 report: Macro Weekly SB1 Markets 21-21.pdf Macro week 20 report: Macro Weekly SB1 Markets 21-20.pdf Macro week 19 report: Macro Weekly SB1 Markets 21-19.pdf Macro week 18 report: Macro Weekly SB1 Markets 21-18.pdf Macro week 17 report: Macro Weekly SB1 Markets 21-17.pdf Macro week 16 report: Macro Weekly SB1 Markets 21-16.pdf Macro week 15 report: Macro Weekly SB1 Markets 21-15.pdf Macro week 14 report: Macro Weekly SB1 Markets 21-14.pdf Macro week 13 report: Macro Weekly SB1 Markets 21-13.pdf Macro week 12 report: Macro Weekly SB1 Markets 21-12.pdf Macro week 11 report: Macro Weekly SB1 Markets 21-11.pdf Macro week 10 report: Macro Weekly SB1 Markets 21-10.pdf Macro week 9 report: Macro Weekly SB1 Markets 21-09.pdf Macro week 8 report: Macro Weekly SB1 Markets 21-08.pdf Macro week 7 report: Macro Weekly SB1 Markets 21-07.pdf Macro week 6 report: Macro Weekly SB1 Markets 21-06.pdf Macro week 5 report: Macro Weekly SB1 Markets 21-05.pdf Macro week 4 report: Macro Weekly SB1 Markets 21-04.pdf Macro week 3 report: Macro Weekly SB1 Markets 21-03.pdf Macro week 2 report: Macro Weekly SB1 Markets 21-02.pdf Om oss Prospekter Nøkkelinformasjonsdokument (KID/PRIIPS) Vilkår og disclaimer Pressemateriale FATCA, CRS & Legal Entity Identifier Karriere Eksterne tjenester VPS konto Market maker Selvbetjent aksjehandel Research web SpareBank 1 Kapitalforvaltning Sosiale medier LinkedIn logo Follow us on LinkedIn Vilkår for bruk av nettsiden Informasjonskapsler Google Analytics SpareBank 1 Markets, Olav Vs gate 5, 0161 Oslo