ECONOMICS COMMENTARY — Oct 27, 2023
Week Ahead Economic Preview: Week of 30 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.
Fed FOMC, BOE, BOJ meetings, US payrolls and global PMIs
Key central bank meetings in the US, UK and Japan will be the highlights next week, alongside worldwide manufacturing and services PMI releases over the next two weeks. Several tier-1 economic releases are also expected, including non-farm payrolls in the US, while GDP figures are due from various parts of the world including the Eurozone, Canada, Taiwan and Hong Kong SAR.
Next week's US FOMC meeting will be the highlight of the week. This comes after convergence between economic indicators and equity market performance took place this week, with the October flash US PMI outlining improvements in economic performance (see special report), while the Q3 earnings season took some air out of the elevated tech sector that had buoyed equity market prices in recent months. Between increased market jitters over the impact of tensions in the Middle East and more positive flash PMI indications of easing price pressures, the Fed's views will be closely watched for guidance on their expected path forward for interest rates. The post-meeting release of the US October labour market report will also add to the equation, with expectations of slowing job additions following signals from the flash PMI. Any acceleration of wage growth will meanwhile complicate the situation.
Separately, the Bank of Japan meeting will also be in the spotlight amid expectations of tweaks to monetary policy settings, specifically the yield-curve control program. While easing price pressures in Japan should help to allay fears of any sooner-than-expected end to its negative interest rate policy, recent bond market volatility adds pressure for the BOJ to act. In contrast, the Bank of England is forecast to hold the bank rate steady at what is regarded as the peak level, according to consensus. This was as flash PMI data signalled further economic contraction, though uncertainties have started to gather again on the inflation front.
Finally, PMI data will be released over the next two weeks for detailed insights into economic conditions at the start of the fourth quarter. Following the flash PMI releases, which highlighted stalling growth in Japan and further downturns in Europe, APAC region performance will be closely watched, especially mainland China's performance.
Price pressures abate ahead of FOMC meeting
Flash PMI data signalled that price pressures cooled again in the US economy ahead of the penultimate Federal Open Market Committee (FOMC) meeting of the year, lending support to the consensus view that rates have peaked for the rest of the cycle.
In fact, flash PMI output prices data have, for the first time since the pandemic, put the Fed's 2.0% target on the radar, having dipped to the lowest level since June 2020. This was while the PMI Composite Output Index indicated a modest uptick in business activity (see special report).
While this painted a rosier picture for the US economy and reflected the calibration of tools by the Fed to tame inflation, fresh uncertainties stemming from risks to inflation and growth amid tensions in the Middle East cloud the outlook. As such, we will be looking to the upcoming Fed meeting for further insights into central bankers' thoughts.
Key diary events
Monday 30 Oct
Australia Retail Sales (Sep, prelim)
United Kingdom Mortgage Lending and Approval (Sep)
Eurozone Consumer Confidence (Oct, final)
Germany Inflation (Oct, prelim)
Tuesday 31 Oct
South Korea Industrial Production and Retail Sales (Sep)
Japan Unemployment Rate (Sep)
Japan Industrial Production and Retail Sales (Sep, prelim)
China (Mainland) NBS PMI (Oct)
Japan BOJ Interest Rate Decision
Thailand Industrial Production (Sep)
Japan Consumer Confidence (Oct)
France Q3 GDP and Inflation (Oct, prelim)
Germany GDP (Q3, flash)
Taiwan GDP (Q3)
Hong Kong SAR GDP (Q3, advance)
Eurozone GDP (Q3, flash)
Eurozone Inflation (Oct, flash)
Italy Q3 GDP and Inflation (Oct, prelim)
Canada GDP (Aug)
United States House Price Index (Aug)
United States CB Consumer Confidence (Oct)
Wednesday 1 Nov
Worldwide Manufacturing PMIs, incl. global PMI* (1-2 Oct)
New Zealand Employment (Q3)
South Korea Trade (Oct)
Australia Building Permits (Sep, prelim)
Indonesia Inflation (Oct)
United States ADP Employment (Oct)
United States ISM Manufacturing PMI (Oct)
United States JOLTs Job Openings (Sep)
United States Fed Interest Rate Decision
Brazil BCB Interest Rate Decision
Thursday 2 Nov
South Korea Inflation (Oct)
Australia Balance of Trade (Sep)
Hong Kong SAR HKMA Interest Rate Decision
Malaysia BNM Interest Rate Decision
United Kingdom BOE Interest Rate Decision
United States Factory Orders (Sep)
Friday 3 Nov
Japan Market Holiday
Worldwide Services, Composite PMIs, inc. global PMI* (3-6 Oct)
Singapore Retail Sales (Sep)
Germany Trade (Sep)
Turkey Inflation (Oct)
Eurozone Unemployment (Sep)
Canada Unemployment (Sep)
United States Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings (Oct)
United States ISM Services PMI (Oct)
* Access press releases of indices produced by S&P Global and relevant sponsors here.
What to watch
Worldwide manufacturing and services PMI
Following the release of October flash PMI data, global manufacturing, services and composite PMI data will be updated over the next two weeks. Manufacturing PMIs will notably be due over November 1-2, while services and composite PMI releases follow over November 3-6.
Flash data pointed to an extension of downturns in the UK and eurozone, while Japan's private sector economy stalled in October. The US flash PMI meanwhile reflected better growth conditions (see special report). Given the varied performance, global data will provide important insights into economic conditions at the start of the fourth quarter.
Americas: Fed FOMC meeting, US October labour market report, ISM PMI, consumer confidence
The Fed is expected to keep rates unchanged in the penultimate FOMC meeting of the year, with views on the path forward being the key focus. October's labour market report will also be released on Friday with the consensus pointing to slower new job additions, in line with indications from flash US PMI. That said, wage growth may accelerate to 0.3% month-on-month, though indications of waning overall CPI from flash PMI releases continue to support the Fed to remain on hold.
EMEA: BOE meeting, Eurozone, Germany inflation and Q3 GDP
Following the ECB and Fed FOMC meetings, the Bank of England concludes their monetary policy meeting on Thursday with the consensus pointing to no changes in rates. The focus then turns to Q3 GDP releases from the Eurozone and Germany, in addition to flash inflation figures for October. Further moderation of price inflation in the Eurozone is expected according to PMI price trends, which preludes official data.
APAC: China PMI, BOJ, BNM, HKMA meetings
In APAC, PMI data, including both Caixin and NBS PMIs, will be the key focus for assessment of economic conditions in mainland China at the start of the fourth quarter.
Several central bank meetings will also take place in the region including in Japan where speculations have been rife on potential tweaks to the BOJ's yield curve control stance.
Special reports
US Soft Landing Hopes Boosted as Flash PMI Lifts Higher and Price Pressures Abate - Chris Williamson
Australian Economic Growth Moderates Due to Tighter Monetary Policy - 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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