ECONOMICS COMMENTARY — Oct 05, 2023
Week Ahead Economic Preview: Week of 9 October 2023
The following is an extract from S&P Global Market Intelligence's latest Week Ahead Economic Preview. For the full report, please click on the 'Download Full Report' link.
US, China inflation, UK GDP and Fed minutes
Fed minutes from the September FOMC meeting will be released in the coming week alongside an assessment of US inflation conditions with CPI data. Inflation readings will also be due from mainland China for an update of both factory gate and consumer price developments. Amid concerns over the growth trajectory in the UK and Eurozone, August GDP and industrial production numbers will be updated for the respective economies. Additionally, the S&P Global Investment Manager Index, tallied from survey respondents collectively managing more than USD $3500 billion of assets, will provide the latest US equity market signals.
The US equity market sell-off has been led by concerns over higher-for-longer interest rates, and little reprieve may be expected from the Fed minutes due Wednesday, where clues on what may lead the Fed to start lowering rates will be sought. This is while we await September's CPI reading from the US, which is expected to confirm that inflation will have remained somewhat sticky at the end of the third quarter, reinforcing the Fed's stance to hold rates for longer.
Outside of the US, UK August GDP data, including sector output updates for manufacture, services and construction, will be closely watched after GDP fell 0.5% in July and PMI figures point to sustained economic weakness in August and September. UK recruitment industry survey will meanwhile provide a timely update on changing labour market trends. In the eurozone, the major release is industrial production, for which the PMI data are indicating further weakness.
Finally in APAC, advance GDP from Singapore will be watched for early indications of Q3 growth performance. That said, the highlight will no doubt be mainland China's inflation and trade data after the Chinese economy return from the Golden Week holidays.
Also watch out for the S&P Global Investment Manager Index, which offers an update on money managers' views towards the US equity market. September's survey revealed a risk averse mood and that equity valuations were the top concern at the end of the third quarter, and it will be of interest whether that remains so following the paring of gains across major equity indices. Allocation preferences among sectors and markets will also be refreshed this month. The following is an extract from S&P Global Market Intelligence's latest Week Ahead Economic Preview. For the full report, please click on the 'Download Full Report' link.
Global economy under stress
Global economic growth remained in the doldrums in September, according to the latest PMI data (see special report). Output worldwide rose only very modestly for a second month in a row, suggesting the pace of expansion has slowed sharply since the upbeat pace seen earlier the year. Things may get worse before they get better: September saw new inflows of work into manufacturing and service sector companies fall for the first time since January.
To see what's changed since the bright picture reported in the second quarter, we can dive into the detailed sector data provided by the PMI. These data highlight two key changes.
First, demand for consumer-oriented services such as travel, tourism and recreation has stalled after strong gains earlier in the year. This isn't surprising, as those buoyant growth rates seen earlier in the year were linked to the full re-opening of the global economy as the final COVID-19 containment measures disappeared. The travel bug has faded, having been overwhelmed by pressure on spending from higher interest rates and the increased cost of living.
Key diary events
Monday 9 Oct
Canada, Japan, South Korea, Taiwan Market Holiday
Indonesia Consumer Confidence (Sep)
Germany Industrial Production (Aug)
Tuesday 10 Oct
Taiwan Market Holiday
Australia NAB Business Confidence (Sep)
Australia Westpac Consumer Confidence (Oct)
Philippines Trade (Aug)
Malaysia Unemployment (Aug)
Norway Inflation (Sep)
Turkey Industrial Production (Aug)
Turkey Unemployment Rate (Aug)
Italy Industrial Production (Aug)
United States Wholesale Inventories (Aug)
Wednesday 11 Oct
South Korea Current Account (Aug)
Australia Building Permits (Aug)
China (Mainland) M2, New Yuan Loans, Loan Growth (Sep)
Indonesia Retail Sales (Aug)
Germany Inflation (Sep, final)
Japan Machine Tool Orders (Sep)
Taiwan Trade (Sep)
Italy Industrial Production (Aug)
Brazil Inflation (Sep)
Canada Building Permits (Aug)
United Kingdom Report on Jobs (Sep)
United States PPI (Sep)
United States FOMC Meeting Minutes (Sep)
S&P Global Investment Manager Index (Oct)
Thursday 12 Oct
Japan Machinery Orders (Aug)
Japan PPI (Sep)
Thailand Consumer Confidence (Sep)
Malaysia Industrial Production (Aug)
United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Aug)
United Kingdom Balance of Trade (Aug)
Germany Current Account (Aug)
India Industrial Production (Aug)
United States CPI (Sep)
United States Initial Jobless Claims
Friday 13 Oct
Thailand Market Holiday
South Korea Unemployment Rate (Sep)
Singapore GDP (Q3, adv)
China (Mainland) CPI, PPI (Sep)
China (Mainland) Trade (Sep)
India WPI (Sep)
France Inflation (Sep, final)
Eurozone Industrial Production (Aug)
India Trade (Sep)
United States Import and Export Prices (Sep)
United States UoM Sentiment (Oct, prelim)
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What to watch
Americas: Fed minutes, US CPI, Brazil CPI
Fed minutes from the September Federal Open Market Committee (FOMC) meeting will be released next week for further insights into Fed's thoughts on the policy path. This comes after the market reacted unfavourably towards indications that the Fed may keep interest rates elevated for a longer than expected duration in a bid to tame inflation. Guidelines on what may be 'convincing evidence' of inflation coming down may be sought just as we await the release of September inflation data. Consensus expectations currently point to US CPI staying little changed in September from 3.7% year-on-year (y/y) in August. Core CPI may likewise continue rising 0.3% month-on-month. According to the S&P Global US Composite PMI price indices, some stickiness in inflation may be expected, backing these forecasts.
EMEA: UK August output, Eurozone industrial production, Germany, France inflation
Following the update of September PMI data, a series of tier-2 economic releases will be due from Europe. The highlight of the week will be August UK monthly GDP data amid concerns over the economic slowdown. The S&P Global / CIPS UK Composite PMI previously revealed that private sector output fell in August for the first time since January, with reduced volumes of business activity in both manufacturing and service sectors. Prior GDP had shown a 0.5% fall in July.
Separately, industrial production figures for the eurozone will be released for August with PMI data preluding weakness for the region. Inflation readings from Germany and France will also be closely watched.
APAC: China inflation, trade data Singapore Q3 GDP
In APAC, CPI and PPI numbers out of mainland China will be the key releases in the coming week. Professional forecasters pencilled in expectations for a slight acceleration for CPI from 0.1% y/y previously, though PPI may stay subdued in deflation territory. Ahead of the Golden Week holidays, Caixin China General Manufacturing PMI data indicated selling prices rose for the first time in seven months, suggesting that we may see a higher factory gate inflation reading. Trade conditions are expected to have improved as well, with a slower contraction in export orders.
Finally, advance Q3 GDP from Singapore will offer a first look into growth conditions in the third quarter serving as a bellwether for the wider APAC region.
Special reports
Global PMI Signals Near-term Downturn Risks Amid Falling Backlogs of Work - Chris Williamson
Vietnam GDP Growth Improves in Third Quarter of 2023 - Rajiv Biswas
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Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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