Week Ahead Economic Preview: Week of 6 November 2023

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RBA meeting, UK GDP, China inflation and trade data in focus

The upcoming week continues to pack a multitude of data releases including global services PMI release and more detailed sector PMI data. The Reserve Bank of Australia also convenes for their penultimate meeting of the year, though the focus may be with inflation and trade figures from mainland China in APAC. Meanwhile UK Q3 GDP will be a key highlight while further US economic data releases including trade figures will be watched post-FOMC. For further insights into US investors' thoughts, the S&P Global Investment Manager Index will be due Tuesday.

The latest Fed meeting helped offset some of the earnings-related gloom with a further pause in rate hikes and acknowledgment of tightening financial conditions by Fed chair Powell. Whether this leads to a paring-back of concerns over central bank policy will be closely watched with the upcoming November update of the S&P Global Investment Manager Index (IMI). Sector preferences among US money managers will also be updated in the IMI survey and gauged against actual performance, as measured by detailed sector PMI numbers, also due in the coming week.

In the UK, GDP figures will be updated with a 0.2% rise in September needed to prevent the economy from having slipped into contraction in the third quarter. As far as the PMI figures are concerned, the weakness in UK economic growth is indicated to have further extended into the fourth quarter, encouraging the Bank of England to hold rates for a second successive month at its early-November meeting.

In APAC, the Reserve Bank of Australia meeting will be in focus, though no changes in rates are expected according to consensus. The attention may therefore instead focus on key economic release from mainland China. After the Caixin China Manufacturing PMI revealed a renewed deterioration in overall manufacturing conditions in October, expectations are for October's trade data to soften in mainland China while the PPI may rise, in line with indications of rising price pressures from the manufacturing PMI price indices, potentially allaying concerns over deflation. China's CPI release will of course also be eagerly awaited in that respect.

Also watch out for third quarter GDP updates from Hong Kong SAR, the Philippines, Indonesia and Malaysia.

Factory job cull gathers pace amid weak demand

The labour market is widely viewed as a lagging indicator, but recent signals of falling global factory employment add a new layer of concern to the economic outlook.

The lagged response of employment to leading indicators such as new orders is illustrated in the following chart, which uses global PMI data for manufacturing compiled by S&P Global. However, this relationship has broken down since mid-2022. although the global PMI's new orders index has averaged 48.2 since mid-2022, reflecting 16 months of continual decline of incoming new business over this period, the employment index has averaged 50.2, signalling modest growth. This is because manufacturers have been able to justify workforce numbers due to the need to work through backlogs of orders, many of which had been accumulated as a result of the supply shortages of the pandemic.

Things seemed to have changed in recent months, however, with employment falling sharply in October, dropping at a rate not seen since 2009 barring the initial pandemic lockdown months, despite the survey's new orders index pointing to a reduced rate of falling demand.

A tipping point has perhaps been reached. With backlogs of work having now fallen for 16 straight months, producers are becoming concerned over staffing levels in the face of these depleted order books. Note that business optimism about future output fell sharply during the month.

If sustained, the downturn in employment bodes ill for the manufacturing outlook, suggesting factories are bracing themselves for further production losses ahead. However, any signs of a weakening labour market are also a concern as heightened job insecurity poses downside risks to consumer spending, which has been an important driver of economic growth in many countries, notably the US. It will be important to watch these employment numbers in the coming months, and especially to monitor any feed-through to the service sector.

Key diary events

Monday 6 Nov
Worldwide Services, Composite PMIs, inc. global PMI* (3-6 Oct)
Japan BOJ Meeting Minutes (Sep 21-22)
Indonesia GDP (Q3)
Thailand Inflation (Oct)

Tuesday 7 Nov
Japan Household Spending (Sep)
Philippines Inflation (Oct)
China (Mainland) Trade (Oct)
Australia RBA Interest Rate Decision
Malaysia Industrial Production (Sep)
Taiwan Inflation and Trade (Oct)
Germany Industrial Production (Sep)
United Kingdom Halifax House Price Index* (Oct)
Eurozone Construction PMI* (Oct)
Eurozone PPI (Sep)
Canada Trade (Sep)
United States Trade (Sep)
S&P Global Sector PMI* (Oct)
S&P Global Investment Manager Index* (Oct)

Wednesday 8 Nov
Australia Building Permits (Sep, final)
Germany Inflation (Oct, final)
France Trade (Sep)
Taiwan Trade (Oct)
Eurozone Retail Sales (Sep)
Canada BOC Summary of Delibrations
United States Wholesale Inventories (Sep)
S&P Global Metal Users and Electronics PMI* (Oct)

Thursday 9 Nov
South Korea, Taiwan Market Holiday
Japan BOJ Summary of Opinions (Oct 30-31)
Japan Current Account (Sep)
Philippines Industrial Production (Sep)
China (Mainland) CPI, PPI (Oct)
Philippines GDP (Q3)
United States Jobless Claims

Friday 10 Nov
Taiwan Market Holiday
Australia RBA Statement on Monetary Policy
Malaysia GDP (Q3)
Norway Inflation (Oct)
Turkey Industrial Production (Sep)
United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Sep)
United Kingdom GDP (Q3, prelim)
United Kingdom Goods Trade (Sep)
Hong Kong SAR GDP (Q3, final)
Brazil Inflation (Oct)
India Industrial Production (Sep)
United States UoM Sentiment (Nov, prelim)

* Access press releases of indices produced by S&P Global and relevant sponsors here.

What to watch

Worldwide services and sector PMI, US IMI

Remaining services PMI data, including the JPMorgan Global Services PMI - compiled by S&P Global - will be due at the start of next week. This comes after manufacturing PMI data revealed that globally, factories have started the final quarter of 2023 on a weak footing. Worldwide detailed sector PMI data follow on Tuesday for deeper insights into economic conditions for individual markets, including bread-outs for detailed metal users and electronics PMIs.

Separately, amid the earnings-related sell-off observed in the US, the S&P Global Investment Manager Index (IMI) will be updated for insights into risk sentiment, market drivers and sector preferences among money managers.

Americas: US trade, UoM sentiment, Canada trade data

Data including US trade and University of Michigan consumer sentiment readings will be released for additional guidance on US economic health, the latter providing a glimpse into whether consumer spending can help sustain economic resilience heading into the fourth quarter.

Canada's trade data will also be due for September with manufacturing PMI data having shown gathering weakness linked in part to sluggish international demand. Greater insights into Canada's service sector can meanwhile be sought with the help of the newly launched S&P Global Canada Services PMI.

EMEA: UK GDP, Germany industrial production, inflation and eurozone retail sales

Third quarter GDP will be due from the United Kingdom amidst indications of persistent weakness in both the manufacturing and service sectors in September having spread into October. Concurrently, a series official economic data are expected, including German industrial production and inflation, eurozone retail sales and PPI, alongside services, composite and construction PMIs for the eurozone and UK house prices from Halifax.

APAC: RBA meeting, China inflation, trade data

The RBA convenes for the penultimate monetary policy meeting of 2023 with no changes expected. The highlights of the week will meanwhile include China's inflation and trade data. Consensus expectations point to weaker trade performance in October while inflation may stay rather steady, in line with early indications from the Caixin PMI.

Special reports

Global Factories Remain in the Doldrums, Job Losses Mount, as Demand Continues to Weaken - Chris Williamson

South Korea's Exports Rebound in October 2023 - Rajiv Biswas

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Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global 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.

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