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ECONOMICS COMMENTARY
Sep 22, 2017
Week Ahead Economic Preview
US inflation, durable goods orders and housing market data will provide further Fed policy guidance, while ECB watchers will be parsing updated euro area inflation figures for clues as to the timing of the next ECB policy move. The week also sees the result of the eagerly awaited German federal election.
Updated UK GDP numbers could also affect the Bank of England's increasingly hawkish policy stance.
In Asia, the flash PMI for Japan and a host of official data releases are published alongside the Bank of Japan's latest meeting minutes, while the Caixin Manufacturing PMI will provide an important indication of production trends in China at the end of the third quarter.
In the US, the Fed's willingness to pare down its $4.5 trillion balance sheet has reflected its intention to continue normalising monetary policy. Survey data showed an upturn in price pressures during August, sending an additional hawkish signal for policy. If personal consumption expenditure (PCE) price data chime with the signals from the PMI data that inflation is picking up, then another rate hike in December will look increasingly likely. Following the latest FOMC meeting, Fed funds futures indicate that there is a 70% chance of a rate increase by December, up from 46% just a week ago.
Meanwhile, US durable goods orders and housing statistics will be assessed for consumption and investment trends.
As is the case in the US, the markets will eagerly await euro area inflation statistics to gauge the future direction of monetary policy. The ECB is expected to wind down its asset purchase programme in response to firmer growth in the euro area, but concerns over the strength of the euro " and its dampening effect on inflation " has raised some doubts as to whether a decision to end its stimulus scheme will be announced as soon as the October policy meeting.
Analysts will also be keenly watching the German federal elections on Sunday September 24. Results of the Dutch and French elections held earlier in the year significantly eased expectations of political risks. A successful campaign for Chancellor Angela Merkel will go some distance to further allay those worries relating to the rise of populism.
The UK economic diary includes the final estimate of GDP in the second quarter. The current estimate stands at 0.3%, unrevised from the preliminary figures. Recent PMI data suggest that the sluggish pace of expansion persisted into the third quarter.
In China, the Caixin China Manufacturing PMI will provide an important lead on economic performance at the end of the third quarter. The data will be released on Saturday September 30, ahead of a seven-day national holiday. China analysts will also be eyeing industrial profit numbers to assess the health of the industrial sector.
Meanwhile, September's flash PMI survey for Japan's manufacturing sector will give early indications as to how growth, and export performance in particular, has progressed at the end of the third quarter. Recent official data showed strong annual growth in Japan's exports during August, confirming the pick-up signalled by the earlier PMI survey data. However, the survey data suggest the extent of the upturn has likely overstated the underlying picture in the third quarter. A range of economic data, including unemployment, construction output, inflation, industrial output and retail sales will provide further insights into the health of Japan's economy, as with the minutes from the Bank of Japan's latest policy meeting.
Download the report for charts and a full diary of key economic releases.
Bernard Aw, Principal Economist, IHS Markit
Tel: +65 6922 4226
Bernard.Aw@ihsmarkit.com
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