ECONOMICS COMMENTARY — Mar 31, 2023
Week Ahead Economic Preview: Week of 3 April 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 PMI, US NFP and central bank meetings in focus
The turn of the month brings about a new set of worldwide PMI data ahead of the US labour market report on Friday. Meanwhile central bank meetings will be held in various APAC economies including Australia, New Zealand and India, although the focus will be on comments from Fed speakers in the week for further insights after the March FOMC meeting. German output data and Japan's Tankan survey figures will also be due in a busy week of economic releases, in addition to several CPI figures.
As the headlines appear to quieten down on banking sector risks, attention returns to economic fundamentals this week as concerns persist over the impact of rising interest rates. Flash PMI, for which the survey period covered the eruption of the banking sector issues, indicated that growth remained resilient in March, though driven primarily by service sector improvements. Trends across the rest of the world will be eagerly anticipated with the full set of manufacturing, services and composite data out in the coming week. The degree to which growth has continued to rebound in mainland China will be a particular area of attention. Furthermore, S&P Global Sector PMI due on Friday will offer insights into the financial sector's performance in March after financial stability issues came to light.
An additional key piece of data in the coming week shedding light on the path forward for the Fed will be the US labour market report. Flash PMI data revealed that greater wage bills had added to cost burdens for private sector firms in March, contributing to higher selling price inflation (see special report). Strong labour market showings alongside recent elevated price inflation indications may validate the Fed on their tightening path, especially as banking sector concerns appear to have abated.
Finally in APAC, central bank meetings will be in the spotlight with three central banks - Reserve Bank of Australia (RBA), Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of India (RBI) - all set to update monetary policy. Hikes are not ruled out in each of these central banks next week as inflation concerns remain front and centre. CPI data in Indonesia and South Korea are also on the cards in the coming week.
Tracking recession risks in the PMI
Upcoming worldwide PMI data will be eagerly assessed in the light of recent banking sector turmoil and ongoing interest rates hikes on both side of the Atlantic. To recap, February's surveys showed a third successive monthly rise in the global PMI output index, pushing it well into expansion territory. The rise in output was the largest recorded since last June and indicative of GDP rising at a quarterly annualized rate of approximately 2.5%. Flas PMI data suggest this upturn gained further momentum in March, at least in the major developed economies.
This return to growth marks an encouraging reversal of the downturn recorded late last year, which had seen output fall globally at the steepest rate recorded since the global financial crisis, if the initial pandemic lockdown months of early 2020 are excluded.
There are concerns, however, that this global growth rebound could prove temporary, with the data so far this year having been buoyed by the initial kick to demand from China's reopening, milder than usual weather in the US and Europe, and better supply chains (which are to some extent a symptom of weak demand). These are therefore key factors to seek further insights into, and thereby better gauge recession risks, from the March PMI updates.
Key diary events
Monday 3 April
Taiwan Market Holiday
Worldwide Manufacturing PMIs, incl. global PMI*
Japan Tankan Survey (Q1)
Indonesia Inflation (Mar)
Switzerland CPI (Mar)
United States Construction Spending (Feb)
United States ISM Manufacturing PMI (Mar)
Germany Industrial Orders (Feb)
Germany Manufacturing Output (Feb)
Canada Unemployment Rate (Mar)
Tuesday 4 April
India, Taiwan Market Holiday
South Korea CPI (Mar)
Australia RBA Cash Rate (Apr)
Germany Trade (Feb)
Eurozone Producer Prices (Feb)
Canada Trade Balance (Feb)
United States Factory Orders (Feb)
United States JOLTS Job Openings (Feb)
Wednesday 5 April
China (Mainland), Hong Kong, Taiwan, Norway, Market Holiday
Worldwide Services, Composite PMIs* (5-6 Apr)
Philippines CPI (Mar)
New Zealand Cash Rate (5 Apr)
Thailand CPI (Mar)
Norway Manufacturing Output (Feb)
United Kingdom Reserve Assets (Mar)
Canada Leading Index (Mar)
United States ADP National Employment (Mar)
United States International Trade (Feb)
United States ISM Non-manufacturing PMI (Mar)
Thursday 6 April
Australia, China (Mainland), Thailand, Philippines, Norway Market Holiday
Hong Kong S&P Global PMI* (Mar)
China (Mainland) Caixin Services PMI (Mar)
India Repo and Reverse Repo Rate (6 Apr)
Switzerland Unemployment Rate (Mar)
Germany Industrial Output (Feb)
United Kingdom Halifax House Prices* (Mar)
United States Initial Jobless Claims
Australia Trade Balance (Feb)
Friday 7 April
Australia, New Zealand, China (Mainland), Hong Kong, Singapore, Indonesia, Philippines, India, Germany, Switzerland, Norway, UK, US, Canada Market Holiday
Japan All Household Spending (Feb)
United States Non-Farm Payrolls, Unemployment, Average Earnings (Mar)
* Press releases of indices produced by S&P Global and relevant sponsors can be found here.
What to watch
Worldwide manufacturing and services PMI releases
After flash PMI data brought positive news in the form of accelerating developed world economic growth in March, worldwide manufacturing and service PMI data will be released in the coming week for deeper insights into global economic conditions at the end of the first quarter.
The preliminary PMI figures revealed that services growth powered the latest improvement in economic conditions in the G4 economies. Whether this is the case for the other economies will be examined with the upcoming releases. Supply conditions and price trends will also be assessed for indications of further pressures for central bank action. This is especially as the recent banking sector stresses have yet to abate.
Americas: US labour market report, Fed speakers
The US labour market report for March will be due at the end of the week, coming on the heels of S&P Global Flash US Composite PMI which revealed that employment growth accelerated in March on the back of stronger overall demand. This supports the consensus expectations for another robust 240k addition to non-farm payrolls in March. A confirmation of the strong labour market situation, coupled with the recent signs of ongoing elevated inflation rates, is expected to add pressure to the Fed to keep tightening rates. Any surprise on the upside for payrolls may invite the market to interpret it as greater urgency to lift rates, even amidst lingering banking sector concerns.
Europe: Germany manufacturing output, trade data
The key focus is expected to be with the series of PMI data due in the coming week after flash PMI indicated that the eurozone grew faster than expected in March.
Besides which, a series of output and trade data will be due from the eurozone's largest economy, Germany, with producer price data for the single currency area also updated. UK house price data will also be eagerly awaited as analysts assess the impact of higher interest rates.
Asia-Pacific: RBA, RBNZ, RBI meetings, Japan Tankan survey, Indonesia, South Korea CPI
Central bank meetings across Australia, New Zealand and India will unfold next week. Besides the monthly PMI surveys, Japan's Tankan survey offer quarterly updates on conditions at manufacturers. Other tier-1 data to watch includes inflation figures from Indonesia and South Korea.
Special reports
US flash PMI Signals Faster Economic Growth in March, but also Warns of Rising Price Pressures - Chris Williamson
Singapore Manufacturing Output Weakens in Early 2023 - Rajiv Biswas
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Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit 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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