Week Ahead Economic Preview: Week of 23 October 2023

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ECB, BoC meetings, October flash PMI and US Q3 GDP data

Central bank meetings in the Eurozone and Canada will be the highlights next week alongside flash October PMI data for the earliest insights into economic conditions in major developed economies at the start of the fourth quarter. Additionally, the US releases Q3 GDP and other key economic indicators such as durable goods orders, core PCE and personal income and spending figures. Several tier-1 data are also expected from APAC economies.

On the back of easing inflationary pressures, a trend likewise highlighted by the IMF in their latest Economic Outlook (see special report), the European Central Bank (ECB) and Bank of Canada (BoC) face reduced pressure for more rate hikes.

That said, the duration in which peak rates will sustain for the ECB remains unclear and has been further complicated by recent geopolitical challenges, especially with rising energy prices posing an upside risk to the easing inflation trend and further pressuring growth to the downside. Upcoming HCOB Flash Eurozone PMI will therefore be keenly watched for updates on both output and price developments.

Meanwhile the BoC, weighing sustained wage pressures and falling CPI, face greater uncertainty in their next move with the market holding mixed views on whether another rate hike will unfold on Wednesday.

More broadly, soaring US government bond yields have captured the market's attention. Equity prices were capped as a result, with geopolitics likewise affecting sentiment. To a large extent, better-than-expected US retail sales data supported the hike in bond yields and further updates in the form of US Q3 GDP, September durable goods orders and personal income and spending figures will be keenly assessed for clues as to yields and the Fed's rate path.

More up-to-date flash PMI for October will also shed light on the growth trajectory at the start of the fourth quarter. With US output having near-stagnated for two consecutive months, according to September's PMI data, growth could slow as we head into Q4. Even worse performances have been seen in the Eurozone and UK, where businesses are likewise facing higher interest rates and the elevated cost of living. Only Japan, spared the hikes in interest rates seen in the US and Europe, has enjoyed sustained services growth.

US consumers see renewed interest in goods

With inflation cooling and the post-pandemic tailwind for travel, tourism and other consumer-oriented services fading, there are signs that US consumer demand is switching back to goods.

Over the past few years, the PMI data compiled by S&P Global have signalled a roller coaster ride for consumer demand. During COVID-19, demand surged for consumer goods as travel restrictions impeded demand for services such as travel and tourism. However, vaccines led to a switch from goods back to services. To illustrate, between June 2020 (after the full impact of the first impact of COVID-19 eased) and January 2021 (when the vaccine roll-out began in earnest), the S&P Global new orders index for US consumer goods averaged 55.7, running well above the 50.0 neutral level to indicate a strong expansion of demand. The corresponding index for new business placed at service providers averaged 46.2 over this period, indicating a steep decline in demand.

The vaccine roll-out meant demand rose for consumer services. This period saw still-robust demand for consumer goods, sustained in part by supply shortages having impeded sales to customers in 2020, but things started to change more noticeably in 2022. Consumer orders for services consistently outperformed orders for goods in all bar two months of 2022; an outperformance that widened as the year progressed and persisted into 2023. Over the first seven months of 2023, the new orders index for consumer services averaged 52.9 against a comparable reading of 47.3 for consumer goods.

In September 2023, however, new orders for consumer services fell back into decline, blamed on cooling demand for recreation, travel and tourism as households tightened their belts. In contrast, new orders for consumer goods rose to outperform services to an extent not seen since 2021. It remains to be seen if this represents a turning point in the pattern of demand, but it certainly adds to concerns that the fillip to global growth received from resurgent demand for consumer services has faded (see special report).

Key diary events

Monday 23 Oct
New Zealand, Hong Kong SAR and Thailand Market Holidays
Singapore CPI (Sep)
Taiwan Industrial Production (Sep)
Taiwan Retail Sales (Sep)
Taiwan Unemployment Rate (Sep)
Eurozone Consumer Confidence (Oct)

Tuesday 24 Oct
India Market Holiday
Australia Judo Bank Flash PMI, Manufacturing & Services*
Japan au Jibun Bank Flash Manufacturing PMI*
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*
US S&P Global Flash PMI, Manufacturing & Services*
South Korea PPI (Sep)
Germany GfK Consumer Confidence (Nov)
United Kingdom Labour Market Report (Aug)

Wednesday 25 Oct
South Korea Consumer Confidence (Oct)
Australia Inflation (Q3)
Germany Ifo Business Climate (Oct)
Canada BoC Interest Rate Decision
United States New Home Sales (Sep)
United States Building Permits (Sep, final)

Thursday 26 Oct
South Korea Business Confidence (Oct)
South Korea GDP (Q3)
Australia Import and Export Prices (Q3)
Thailand Trade (Sep)
Malaysia PPI (Sep)
Singapore Industrial Production (Sep)
Hong Kong SAR Trade (Sep)
Turkey TCMB Interest Rate Decision
Eurozone ECB Interest Rate Decision
United States Durable Goods Orders (Sep)
United States GDP (Q3, advance)
United States Wholesale Inventories (Sep)
United States Pending Home Sales (Sep)

Friday 27 Oct
Australia PPI (Q3)
China (Mainland) Industrial Profits (Sep)
Singapore Unemployment (Q3, prelim)
Taiwan Consumer Confidence (Oct)
France GDP (Q3, prelim)
France Inflation (Oct, prelim)
Spain GDP (Q3, flash)
Italy Business Confidence (Oct)
United States Core PCE Price Index (Sep)
United States Personal Income and Spending (Sep)
United States UoM Sentiment (Oct, final)

* Access press releases of indices produced by S&P Global and relevant sponsors here.

What to watch

October flash PMI releases

Flash PMIs for major developed economies, including the US, UK, eurozone, Japan and Australia, will be due Tuesday, October 24. With a second month of near-stalled global growth in September, we will be looking to the flash PMI releases for the earliest insights into business conditions at the start of Q4. As highlighted in the IMF's latest Economic Outlook (see special report), regional divergences have been widening, a trend we have long observed via the PMI surveys. Whether the US, the world's largest economy, has avoided a downturn, or if the UK and eurozone have further contracted while Japan remained in solid contraction, will all be answered with the upcoming flash PMI update.

Americas: BoC meeting, US Q3 GDP, durable goods orders, core PCE and personal income and spending

The Bank of Canada convenes with mixed views on whether the central bank will vote for another 25 basis points (bps) hike. While a historically tight labour market and rising wages back another hike in rates, latest indications of easing price inflation, including via September PMI data, says otherwise.

The first estimate of US Q3 GDP will meanwhile be the key data highlight alongside the core PCE reading for September. GDP is expected to have surged higher, with the Atlanta Fed GDPNow tracker for example pointing to an annualised rise of around 5%. Growth should weaken in the fourth quarter, however, due to rising headwinds.

EMEA: ECB meeting, UK labour market report

The European Central Bank's penultimate monetary policy meeting unfolds next week with no changes to rates expected according to consensus. Amid easing inflationary pressures in the eurozone, the ECB is widely seen to have reached the peak of their current tightening cycle, though uncertainty over how long peak rates will likely be maintained will be closely examined with upcoming meeting materials.

Besides the flash PMI releases, key releases from Europe include the UK's full labour market report due Tuesday, delayed from October 17. Consensus expectations point to an unchanged unemployment rate, but employment is set to remain under pressure. French GDP figures are also due.

APAC: South Korea GDP, Singapore CPI

Several tier-1 data are spotted in APAC including Q3 GDP from South Korea and inflation data from Singapore.

Special reports

Reviewing the IMF Global Economic Outlook and Risks via PMI Signals - Chris Williamson

India's Manufacturing Output Surges While Inflation Pressures Ease - 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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