JAPAN DATA: Japan Investors Sell Offshore Bonds, Buy Overseas Equities

BRC-KPMG retail sales increased 3.2% Y/Y in December, reversing nearly all of November's -3.3% Y/Y, but it should be taken with a pinch of salt as the survey period included Black Friday this time around (it wasn't included in Dec'23). 

• This is technically the highest reading since March 2024 (which was boosted by the earlier timing of Easter) whilst Like-for-Like sales increased 3.1% Y/Y (vs a fall of 3.4% in November).
• Food sales rose 1.7% Y/Y in December after 2.2% Y/Y in Nov whilst non-food sales jumped 4.4% Y/Y after -7.9% Y/Y on the same Black Friday distortion.
• Smoothing out the distortion, the three month to December figures saw sales growth of just 0.4% 3M Y/Y.
• Given the BRC follows the ONS calendar dates, it is likely ONS December retail sales will also be firm, somewhat artificially inflated by the inclusion of Black Friday sales.
• Data covers: 24 November - 28 December 2024.

• Looking ahead, the Chief Executive of the BRC projects sales growth to average 1.2% in 2025, below projected shop price inflation of 1.8%. 

   

November CPI data is published on Wednesday January 8 and being mid quarter will include more detail on the domestically-generated services components. CBA is forecasting a pickup in headline inflation to 2.6% y/y from 2.1% due to the expiry of some electricity rebates, which are likely to cause volatility until July this year. Thus, the RBA has said that it is focussing on the underlying trimmed mean measure. CBA expects that it will undershoot RBA forecasts when Q4 prints on January 29.

• CBA is forecasting November trimmed mean inflation to moderate 0.1pp to 3.4% y/y and its current estimate for Q4 is 0.6% q/q and 3.3% y/y after 0.8% and 3.5% in Q3. It sees the risks around its forecasts as skewed to the downside.  The RBA forecasted Q4 to moderate to 3.4% y/y in its November update.
• “It would not take much to see us revise lower our nowcast for the trimmed mean CPI; we have been quite conservative in our translation of the monthly figures into their quarterly equivalent.”
• “An inflation outcome lower than the RBA’s forecast is a necessary condition for an easing cycle to begin in February. It may not be sufficient, however, given the RBA’s current views on the unemployment gap.”
• CBA expects “an ongoing moderation in market services inflation, to around 4¼%/yr from 4.6%/yr. This will be what the RBA watches most closely.”
• “An 18%/mth surge in electricity prices as government energy rebates roll‑off. We expect the largest impact in November from an unwind of WA rebates. Further large increases are set to occur in Q1 25, driven by the unwind of Qld rebates.”