ECONOMICS COMMENTARY — Nov 17, 2023
Week Ahead Economic Preview: Week of 20 November 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.
Fed minutes and flash PMI releases
A busy data week includes November flash PMIs, GDP readings from Germany and Thailand, and inflation figures for Canada, Japan and Singapore. Nestled among which are meeting minutes from the US Fed and RBA, shedding light on their latest decisions. Additionally, more central bank meetings unfold in Turkey and Indonesia.
Flash PMI releases across major developed economies will offer the earliest clues on growth and inflation trajectories. Inflation in both the US and in Europe has fallen faster in recent months than many had expected, though the data have merely fallen in line with the signals from the PMI price indices. Hence the survey price gauges will be carefully monitored to assess the speed with which inflation targets may come into view.
Whether recessions are the cost of inflation being beaten will meanwhile be gauged by the PMI output and order book data. The October surveys showed growth stalling globally, albeit with the US showing somewhat greater resilience than the Eurozone and UK. The sustained impact of past interest rate hikes on demand conditions will therefore be scrutinised, and could potentially lead to a re-pricing of rate expectations in 2024. Employment data from the PMIs will also be eagerly awaited, following signs of the October surveys that businesses were becoming increasingly concerned over payroll numbers, especially in manufacturing.
The spotlight also falls on the release of the Fed's meeting minutes. While the Fed contemplates the risks of both doing too much and too little, the market perceives a dovish tilt.
Several tier-1 data will also be anticipated in the coming week, including the final Q3 GDP readings from Germany and Thailand. Japan's inflation print will meanwhile be especially closely watched given recent yen fluctuations. Softening growth momentum and falling GDP, alongside signs of cooler inflation, as seen via October's au Jibun Bank Japan PMI, have so far provided some support for the BOJ's accommodative stance.
Finally, central bank meetings in Turkey and Indonesia are expected in the coming week where further tightening of monetary policy are not ruled out as policymakers seek to fight surging inflation and shore up the currency respectively.
US-Europe divergence in focus
Flash PMI survey data will be published in the coming week, with markets eager to glean further insights into growth and inflation trends, and the extent to which regional divergences are persisting. In October, the eurozone was the weakest link, with output having fallen for a fifth successive month, dropping at an accelerating rate commensurate with GDP declining at a quarterly rate of around 0.3%. The UK also saw output fall, down for a third consecutive month, albeit declining at a more moderate pace than in the Eurozone, consistent with GDP dropping at a mere 0.1% quarterly rate.
The US, in contrast, saw output not only rise in October but growth also accelerated - albeit remaining modest compared to earlier in the year. The US outperformance relative to Europe is now the sharpest seen outside of the pandemic lockdowns since early 2015, raising the possibility of the US enjoying a soft landing while Europe slips into recession.
Such a US-European divergence was also signalled by the S&P Global Business Outlook Survey, which monitors firms' expectations for the coming year. US firms are clearly more upbeat than their European counterparts. While US firms' expectations of output, capex, R&D spend and employment were all little changed, or in some cases improved, on earlier in the year, all gauges fell in the eurozone.
The flash PMI new orders data are therefore likely to be a primary avenue through which we get visibility on the changing demand environment facing businesses, and will provide an important assessment of whether the US-European divergence is persisting.
Key diary events
Monday 20 Nov
China (Mainland) Loan Prime Rate (Nov)
Thailand GDP (Q3)
Malaysia Trade (Oct)
Germany PPI (Oct)
Taiwan Export Orders (Oct)
Tuesday 21 Nov
South Korea PPI (Oct)
New Zealand Trade (Oct)
Australia RBA Meeting Minutes (Nov)
Switzerland Trade (Oct)
United Kingdom Labour Productivity (Q3, prelim)
Hong Kong SAR Inflation (Oct)
Canada Inflation (Oct)
Canada New Housing Price Index (Oct)
United States Chicago Fed National Activity Index (Oct)
United States Existing Home Sales (Oct)
United States Fed FOMC Minutes
Wednesday 22 Nov
Australia Westpac Leading Index (Oct)
South Africa Inflation (Oct)
Taiwan Unemployment (Oct)
United Kingdom CBI Industrial Trends Orders
United States Durable Goods Orders (Oct)
Eurozone Consumer Confidence (Nov, flash)
United States University of Michigan Sentiment (Nov, final)
Thursday 23 Nov
United States, Japan Market Holiday
Australia Judo Bank Flash PMI, Manufacturing & Services*
UK S&P Global/CIPS Flash PMI, Manufacturing & Services*
Germany HCOB Flash PMI, Manufacturing & Services*
France HCOB Flash PMI, Manufacturing & Services*
Eurozone HCOB Flash PMI, Manufacturing & Services*
Singapore GDP (Q3, final)
Singapore Inflation (Oct)
Norway GDP (Q3)
Indonesia BI Interest Rate Decision
Taiwan Industrial Production (Oct)
Taiwan Retail Sales (Oct)
Turkey TCMB Interest Rate Decision
South Africa SARB Interest Rate Decision
Friday 24 Nov
United States, India (Partial) Market Holiday
Japan au Jibun Bank Flash Manufacturing PMI*
US S&P Global Flash PMI, Manufacturing & Services*
New Zealand Retail Sales (Q3)
Japan Inflation (Oct)
Malaysia Inflation (Oct)
Singapore Industrial Production (Oct)
Germany GDP (Q3, final)
Germany Ifo Business Climate (Nov)
Mexico GDP (Q3, final)
Canada Retail Sales (Sep)
* Access press releases of indices produced by S&P Global and relevant sponsors here.
What to watch
November flash PMI releases
Flash PMI data for the major developed economies - including the US, UK, Eurozone, Japan and Australia - will be released over 23-24 November amid holidays in the US and Japan.
The penultimate set of flash PMI data for 2023 will be closely watched for the earliest insights into where the global economy is headed after worldwide business activity stalled at the start of Q4. That said, inflationary pressures have eased alongside the slowdown in activity, with central bank inflation targets coming into view. As such, any indications of a further easing of price pressures may help feed the current market view that rates have peaked.
Americas: Fed minutes, US durable goods orders, home sales, Canada inflation
Minutes from the latest November 1 FOMC meeting will be released on Wednesday for insights into the Fed's thoughts after the benchmark overnight interest rate was again maintained at the 5.25%-5.50% range. Post-meeting Fed rhetoric suggested a wait-and-see approach given evolving economic conditions. Amid rising expectations that the Fed will commence cutting rates before June next year, according to the CME FedWatch tool, insights into the qualifying factors will be sought from the minutes.
Meanwhile, Canada's inflation will be due on Tuesday. According to the S&P Global Canada Composite PMI, which comprises the newly launched S&P Global Canada Services PMI, selling prices rose at a steeper rate in October.
EMEA: Germany Q3 GDP, PPI, Ifo Business Climate data, Turkey TCMB meeting
The key release in the coming week is expected to be the flash UK and Eurozone PMI data. Besides which, Germany's final Q3 GDP will be due Friday, after October PPI and the Ifo business climate data releases.
In Turkey, the TCMB convenes next week with another hike not ruled out for the coming meeting.
APAC: RBA minutes, China Loan Prime Rate, BI meeting, Japan, Singapore inflation, Thailand GDP
In APAC, watch for RBA minutes from the November meeting while Bank Indonesia convenes. Key data releases meanwhile include inflation readings from Japan.
Special reports
Global PMI Data Show Prices Rising at Slowest Rate Since December 2020 - Chris Williamson
India's Rapid Growth Continues as Inflation Pressures Ease Further - 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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