Essential data on wages (Daily analysis 7.12.2018)

Data on industrial production from Germany fails the market. Low GDP reading from the eurozone with worrying productivity information. Wages as the key part of the Department of Labour data. The zloty is slightly depreciating but remains in the range of 4.28-4.29 per euro.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

• 2:30 p.m.: BLS data on the US labour market. Change in employment in the non-farm sector (estimates: 198 thousand). Unemployment (estimates: 3.7%). Average hourly wages (estimates: 0.3% m/m and 3.1% y/y).

Attention shifted to data

The last hours were characterised by the stabilization of equity and bond market quotations. The fluctuation range of currencies is also very low at the end of the week. Therefore, it is worth paying attention to the data received since the morning and important afternoon readings.

The morning publications from Germany and the eurozone were once again not impressive. Industrial production fell by 0.5% m/m. The seasonal average (for the last six readings) is only 0.1% m/m for each month. The annual reading has clearly rebounded upward, but this is only the result of a low base from a year ago. In November, the base is very high, which increases the risk that the next readings will be negative for the next year.

There is nothing good about the GDP of the eurozone. The growth was only 0.2% q/q. In addition, the GDP components may be worrying. Private and public consumption and investments had a meagre contribution to the growth. Equally worrying is also the weakest productivity growth in over 5 years, which amounted to only 0.3% y/y in the eurozone.

The data may also be relevant for next week's ECB meeting. There are no signs that the situation in the eurozone will improve. The projections will also be clearly revised downward (especially for the current year) and the risk balance may be revised downwards from a neutral level. This would not be good news for the euro.

Apart from issues related to the Old Continent, today attention is focused on data from the USA. The volatility of the number of new payrolls created in the US economy is quite high. In addition, the number of new jobs is growing all the time. If this month is weaker, it should not cause a dramatic dollar weakening. Also in the case of a positive surprise, the reading will probably be ignored.

Therefore, wages will be a much more important parameter. The economists' consensus points to a growth of 0.3% m/m and 3.1% y/y. It seems that exceeding this limit by 0.1 percentage points in both cases should be positive for the dollar. First of all, it should show greater tension in the labour market, which supports further tightening of monetary policy. Secondly, higher wages and risk of inflation growth (including the core inflation rate). Thirdly, the reading at the level of 3.2% would be the highest in less than a decade. If wage growth exceeds expectations, then we can anticipate a positive signal for the dollar and a breakthrough from a rather limited range of fluctuations in recent days.

Limited changes in zloty's valuation

The zloty is stable. Movements on the euro are within the plus/minus range of 0.005 PLN and are generally ignored in the broader analysis. There are also no spectacular changes in the dollar and the pound. The zloty will be waiting for data from the US labour market, but above all the dollar may be subject to greater changes after BLS readings.

If the wage estimates are exceeded, then the US currency has a chance to clearly appreciate and reach around 3.80 PLN. In the absence of surprises, the zloty should remain stable in relation to the main currencies.