ECONOMICS COMMENTARY — Sep 25, 2023
Week Ahead Economic Preview: Week of 25 September 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 core PCE, Eurozone inflation and China PMIs to watch
A series of economic releases will be the highlight in the coming week ahead of worldwide manufacturing and services PMI updates at the start of October. Noteworthy indicators to watch in the coming week includes US core PCE and eurozone inflation readings for the latest inflation updates in these major developed economies. Final Q2 GDP readings from the US and UK will also be due while tier-2 data such as personal income and durable goods orders figures from the US will also be closely monitored. Ahead of the Golden Week holidays in mainland China, both NBS and Caixin PMIs will also provide insights into September business conditions.
The risk of higher-for-longer rates have risen in importance as a concern for market participants this week following the September Federal Open Market Committee (FOMC) meeting whereby Fed officials were found to anticipate less easing in 2024 than the market consensus. This was followed by the September flash US PMI which revealed that the US economy was close to near stagnation at the end of the third quarter, reflecting the impact from past rate hikes, though selling price inflation stayed historically elevated to support tighter-for-longer financial conditions. Against such a backdrop, the importance of data in guiding monetary policy is now more so than ever, and next week's core PCE, personal income, spending and durable goods data will provide further official confirmation of the US inflation and growth trends.
In Europe, September flash inflation reading from the eurozone will be highly watched given the European Central Bank's (ECB) hawkish remarks. While the latest PMI price data suggest further easing of inflation is expected, arriving at the 2% target level is still not guaranteed at the moment (see box). UK Q2 GDP will also be updated again next week.
Finally in APAC, no surprises are expected at the Bank of Thailand meeting, but the mainland China PMI data due at the end of the week remain anybody's guess at this point. August's data showed further slowing of growth momentum in the mainland Chinese economy while business expectations for the year ahead also lowered, signalling added downside risks.
Eurozone September inflation data
The latest HCOB Flash Eurozone PMI indicated that output, covering both manufacturing and services, posted below the 50.0 neutral point for a fourth straight month in September. This signalled continued contraction for the eurozone through the third quarter, though perhaps not a surprise for this developed world economy given the trend we have observed for backlogs (see special report).
Despite the ongoing slowdown, however, inflation remains key for central bankers with ECB policymakers highlighting the fact that inflation is still too high even after easing in recent months. As such, we look to the flash HICP data for September to get an official confirmation of price conditions at the end of Q3. As far as PMI price indices data, which preludes the trend for official inflation, have signalled, CPI is expected to further fall in the coming months including during September.
However, while selling price inflation offers some hopes that we will see headline CPI head more credibly towards the 2.0% target, input prices have risen at a faster rate in September. In fact, input cost inflation was found at the highest in four months, attributed in part to higher energy prices. While it remains to be seen whether added cost pressures may translate to higher selling prices or if businesses will grow more reserved in sharing cost burdens with their clients in a bid to retain and attract customers in the current climate. There is a degree of uncertainty over how long the ECB may keep rates elevated as has been the case with the Fed this week.
Key diary events
Monday 25 Sep
Singapore CPI (Aug)
Germany Ifo Business Climate (Sep)
Tuesday 26 Sep
South Korea Consumer Confidence (Sep)
Thailand Trade (Aug)
Singapore Industrial Production (Aug)
Hong Kong Trade (Aug)
United States S&P/Case-Shiller Home Price (Jul)
United States CB Consumer Confidence (Sep)
United States New Home Sales (Aug)
Wednesday 27 Sep
South Korea Business Confidence (Sep)
Japan BOJ Meeting Minutes
China (Mainland) Industrial Profits (Aug)
Taiwan Consumer Confidence (Sep)
Germany GfK Consumer Confidence (Oct)
Thailand BOT Interest Rate Decision
United States Durable Goods Orders (Aug)
Thursday 28 Sep
South Korea, Indonesia, Malaysia Market Holiday
Australia Retail Sales (Aug, prelim)
Thailand Industrial Production (Aug)
Eurozone Economic Sentiment (Sep)
Eurozone Consumer Confidence (Sep, final)
Germany Inflation (Sep, prelim)
United States GDP (Q2, final)
United States Pending Home Sales (Aug)
Friday 29 Sep
China (Mainland), South Korea, Taiwan, Market Holiday
Japan Unemployment Rate (Aug)
Japan Industrial Production, Retail Sales (Aug)
Japan Consumer Confidence (Sep)
Singapore PPI (Aug)
Germany Retail Sales (Aug)
United Kingdom GDP (Q2, final)
United Kingdom Nationwide Housing Prices (Sep)
France Inflation (Sep, prelim)
Thailand Current Account (Aug)
Turkey Trade (Aug, final)
Germany Unemployment Rate (Sep)
Hong Kong SAR Retail Sales (Aug)
United Kingdom Mortgage Lending and Approval (Aug)
Eurozone Inflation (Sep, flash)
Italy Inflation (Sep, prelim)
South Africa Trade (Aug)
Canada GDP (Aug, prelim)
United Core PCE (Aug)
United States Personal Income and Spending (Aug)
United States Wholesale Inventories (Aug, adv)
United States UoM Sentiment (Sep, final)
United States Goods Trade Balance (Aug, adv)
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What to watch
Americas: US Q2 GDP, core PCE, personal income and spending, durable goods orders, consumer confidence
Following the Fed FOMC meeting this week where the emphasis remained upon data in guiding the Fed's interest rate path forward, especially with regards to the duration in which rates may stay elevated, we look to a series of data releases from the US including the final Q2 GDP reading and the Fed's favourite inflation gauge, the core PCE figure.
Consensus expectations currently point to the core PCE index to stay unchanged in August at 0.2% month-on-month (m/m), though earlier core CPI release did reveal slightly higher than expected reading at 0.3% m/m in line with PMI indications.
Meanwhile the personal income and spending reading will be of interest especially following the latest flash US PMI release which revealed that further weakness with regards to growth ensued at the end of the third quarter.
EMEA: Eurozone inflation, economic sentiment, German inflation, retail sales, Ifo business climate, UK Q2 GDP
September inflation reading from the eurozone will be the key release from the region in the coming week with forecasters looking for headline CPI to stay near unchanged from August's reading while the core reading may moderate slightly. This comes after the HCOB Flash Eurozone PMI release, which preludes the trend for the official inflation reading, showed further moderation of selling price inflation.
APAC: BOT meeting, China PMI releases, Japan industrial production and retail sales, Singapore inflation data
In APAC, the Bank of Thailand convenes in the coming week, though no changes to monetary policy settings are expected. A series of economic releases including Japan's industrial production and retail sales will also be scrutinised, though China PMI releases over the weekend are likely to be the highlights. NBS PMI data and Caixin PMI figures will be due Saturday and Sunday respectively ahead of the golden week holidays. The focus will be how mainland China's output conditions evolved at the end of the third quarter given the focus on growth.
Special reports
Backlogs of Work Hint at Further Global Economic Weakness, but Also Lower Inflation - Chris Williamson
Prospects and Hurdles: Mexican Manufacturers on Nearshoring Horizon - Pollyanna De Lima
Singapore Economy Continues to be Hit by Slumping Exports - 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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