ECONOMICS COMMENTARY — Sep 29, 2023
Week Ahead Economic Preview: Week of 2 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.
Worldwide PMIs, US payrolls, plus RBA, RBNZ, RBI meetings
The start of a new month brings global PMI data releases to help assess economic conditions across the world and across various sectors. This is while key releases such as US non-farm payrolls are awaited at the end of the week. More central bank meetings will also unfold in Australia, New Zealand and India, with potential for further interest rate hikes.
Next week's release of worldwide PMI data is set to add further insights on global developments both on the growth and inflation fronts. These surveys will be especially closely watched after prompting the recent heightening of concerns over the impact of higher-for-longer rates. As it is, flash PMI data from major developed economies have outlined the softness in economic conditions and pointed to still-elevated inflation (see special report). Any mirroring of these trends on a global scale may again remind the market of the impact on growth and earnings from restrictive monetary policy settings. This is especially if consumer services, which supported growth this year, were found to have further faltered after demand was shown to have fallen in August.
That said, one area that remained resilient in the PMI had been the US labor market. This was observed through the flash PMI figures showing employment growth having ticked higher at the end of the third quarter. Official non-farm payrolls readings will be scrutinised for such indications of labor market strength, with the consensus pointing to potentially lower unemployment rate in September. Any news of faster wage growth will also be a concern, given its contribution to keeping inflation elevated.
Finally, in APAC, central bank meetings in Australia, New Zealand and India are set to take place. The Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) have analysts at odds over whether another rate hike may be implemented at these meetings. This is amid policymakers' persistent battle with getting inflation under control. Softening economic and inflation conditions have invited some calls for interest rates to have peaked, though further hawkish tones should not be ruled out even if rates were to be kept unchanged next week. In India, we expected rates to be on hold as the RBI awaits September inflation data.
Global trade slump under scrutiny
Slumping trade has been acting as a major drag on global growth, adding near-term risks to the economic outlook, so new data in the coming week will be important to watch.
Barring the first pandemic lockdown in 2020, when shipping collapsed, recent months have seen the steepest fall in worldwide goods trade since the global financial crisis. First, the Global PMI surveys showed new orders for goods falling in August at a rate only slightly less than the intense fall recorded in July. Excluding the early COVID-19-affected months of 2020, the past year has seen the sharpest contraction of goods exports since 2009. Official data, analysed by CPB, have since followed the PMI down. A 0.6% drop in worldwide trade volumes in July ؘ- the latest month available - took global goods trade 3.2% below levels of a year. That too was the steepest fall in trade since 2009 excluding the 2020 lockdowns.
According to PMI survey respondents, destocking, deglobalisation, weak demand from a disappointing mainland China recovery and a post-pandemic switch in demand from goods to services have all contributed to falling global trade flows this year.
While the PMI data up to August showing no real sign of respite, the coming week sees the September update to the PMI, and the fresh survey data will be important to watch for the developing path of global trade. A further slide lower will be bad news especially for many trade-focused APAC economies and Germany, though the US with its large domestic market may be better insulated. On the other hand, any signs of the trade drag moderating could mark a tentative positive turning point in the wider manufacturing cycle.
Key diary events
Monday 2 Oct
China (Mainland), India, Hong Kong SAR Market Holiday
Worldwide Manufacturing PMIs, incl. global PMI* (Sep)
South Korea Industrial Production and Retail Sales (Aug)
Japan Tankan Large Manufacturers Index (Q3)
Japan BOJ Summary of Opinions (Sep)
Indonesia Inflation (Sep)
Eurozone Unemployment (Aug)
United States ISM Manufacturing PMI (Sep)
Tuesday 3 Oct
China (Mainland), South Korea Market Holiday
Australia Building Permits (Aug, prelim)
Australia RBA Interest Rate Decision
India S&P Global Manufacturing PMI* (Sep)
Switzerland Inflation (Sep)
Turkey Inflation (Sep)
Brazil Industrial Production (Aug)
United States JOLTs Job Openings (Aug)
Wednesday 4 Oct
China (Mainland) Market Holiday
Worldwide Services, Composite PMIs, inc. global PMI* (Sep)
New Zealand RBNZ Interest Rate Decision
Eurozone Retail Sales (Aug)
Eurozone PPI (Aug)
United States ADP Employment Change (Sep)
United States ISM Services PMI (Sep)
United States Factory Orders (Aug)
Thursday 5 Oct
China (Mainland) Market Holiday
South Korea Inflation (Sep)
Australia Trade (Aug)
Hong Kong SAR S&P Global PMI* (Sep)
Philippines Inflation (Sep)
Thailand Inflation (Sep)
India S&P Global Services and Composite PMI* (Sep)
Singapore Retail Sales (Aug)
Germany Trade (Aug)
Taiwan Inflation (Sep)
Canada Trade (Aug)
United States Trade (Aug)
S&P Global Sector PMI* (Sep)
Friday 6 Oct
China (Mainland) Market Holiday
India RBI Interest Rate Decision
Germany Factory Orders (Aug)
United Kingdom Halifax House Price Index* (Sep)
France Trade (Aug)
Taiwan Trade (Sep)
Canada Employment (Sep)
United States Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings (Sep)
S&P Global Metal Users and Electronics PMI* (Sep)
* Access press releases of indices produced by S&P Global and relevant sponsors here.
What to watch
Worldwide manufacturing, services and detailed sector PMI releases
Monday sees the release of worldwide manufacturing PMIs, followed by services and composite data on Wednesday. Flash PMI from major developed economies offered early insights into September conditions, revealing that the G4 economies - US, UK, Eurozone and Japan - collectively contracting for a second month, albeit with some notable divergences (see special report). Worryingly, prices were found to remain sticky among the G4 economies and the worldwide trend will likewise be studied for signs of still-elevated inflation.
Detailed sector PMI data will also be due through the week with the global picture updated on Thursday. Metal users PMI and electronics figures will round off the week on Friday.
Americas: US labour market report, PMI and ISM readings, Canada employment report
A further slowdown in new job additions is expected for the US in September as we await the non-farm payrolls release. Consensus expectations currently point to a smaller 150K addition for non-farm payrolls, down from 187K previously. Wage growth could accelerate to 0.3% month-on-month (m/m) but the unemployment rate is widely anticipated to slip to 3.7%. Flash PMI data by S&P Global showed employment growth ticking higher in September, adding to signs of labour market strength. ISM data are updated in the US alongside the final PMIs from S&P Global, as well as factory orders, trade data and job openings.
EMEA: Eurozone retail sales, Germany trade
Besides the PMI data, a series of tier-2 releases from Europe. These include eurozone PPI, unemployment and retail sales readings, German trade and factory orders data, UK house prices and Swiss inflation.
APAC: RBA, RBNZ, RBI meetings, Japan Tankan survey
Central bank meetings unfold in Australia, New Zealand and India with hikes not ruled out for the RBA and RBNZ. The RBI is perhaps the least likely to raise rates, awaiting news on inflation amid changing food and oil prices. Japan's Tankan survey and inflation readings across various APAC economies will also be key releases to study in addition to PMI readings. Finally, mainland China PMI figures will be updated over the weekend, ahead of the Golden Week holidays.
Special reports
Flash PMI Signal Unwelcome Combination of Economic Contraction and Rising Prices - Chris Williamson
Thailand's Economy Faces Headwinds from Manufacturing Sector Downturn - 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.
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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