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US activity data, China Q3 GDP, UK, eurozone and Japan CPI

A slew of important economic updates in the coming week will provide insights into economic growth and inflation trends. From the growth perspective, activity data in US and mainland China include retail sales and industrial production figures. China (mainland) will also provide an update of third quarter GDP on Wednesday. Inflation readings will meanwhile be due for the UK, eurozone, Japan and Canada for assessment of price developments. Finally, central bank meetings in South Korea and Indonesia will also unfold.

We will be looking for further insights into US business conditions with the release of September retail sales and industrial production data. This is as the October S&P Global Investment Manager Index signalled reduced risk aversion among US investors on the back of easing valuation concerns, though worries were found to have intensified central bank policy and the macroeconomic environment, both domestically in the US and globally.

A major global economic worry has been the sluggish post-pandemic recovery in mainland China. Slower Q3 growth in mainland China is expected when the official data are updated on Wednesday, per early indications from Caixin PMI data. Retail sales and industrial production figures will similarly reflect this trend as China's consumer spending and manufacturing output slowdowns look set to continue.

Additionally, inflation numbers will also be key tier-1 data to watch, and these will be updated across the UK, eurozone, Japan and Canada. In line with the global trend, inflationary pressures are widely expected to ease in the abovementioned economies, though the UK and eurozone may continue to see prices staying relatively elevated even into early 2024 based on the trend from PMI selling prices data.

Finally, monetary policy committees in South Korea and Indonesia update their decisions on Thursday though no changes are expected according to consensus. The Bank of Korea is expected to stay on hold until the end of 2023. While having been amongst the first few to lift rates in the current cycle, the BOK is likewise expected to cut rates in early 2024 amid weakening economic indicators, making this an Asian central bank to watch.

UK labour market in focus

With GDP data having added to signs that the UK economy has stagnated at best in the third quarter - a 0.2% expansion of GDP in August only partially offset a 0.6% decline in July - the weakened economic growth trajectory added some support to the Bank of England's decision to hold its policy rate unchanged in September. GDP now needs to grow by 0.2% in September for the UK to avoid slipping into decline.

However, perhaps more important will be the upcoming official labour market update. Wage growth in particular has proved stubbornly elevated, and economists at Threadneedle Street will be wanting to see some of the heat being taken out of the UK labour market to help mollify concerns over second round inflation pressures.

According to the various surveys, the UK labour market is indeed cooling. The PMI's employment sub-index fell into contraction territory in September, signalling the steepest decline in payrolls since the COVID-19 lockdowns of early 2021. Recruitment industry survey data, also compiled by S&P Global, have also been sending worrying signals. The number of people placed in permanent jobs has been falling steeply in recent months, as overall demand for staff fell in September at the sharpest rate since early 2021. Note that, if pandemic months are excluded, these PMI and recruitment survey gauges are now at their lowest since 2009, highlighting the extent to which the worryingly weak job market trend may ease inflation concerns at the Old Lady.

Key diary events

Monday 16 Oct
Indonesia Trade (Sep)
Japan Industrial Production (Aug, final)
Germany Wholesale Prices (Sep)
Italy CPI (Sep, final)
Eurozone Balance of Trade (Aug)
Canada Manufacturing Sales (Aug, final)

Tuesday 17 Oct
South Korea Export and Import Prices (Sep)
New Zealand CPI (Q3)
Australia RBA Meeting Minutes
Singapore Non-oil Domestic Exports (Sep)
United Kingdom Labour Market Report (Aug)
Germany ZEW Economic Sentiment (Oct)
Canada Inflation (Sep)
Canada Housing Starts (Sep)
United States Retail Sales (Sep)
United States Industrial Production (Sep)
United States Business Inventories (Aug)

Wednesday 18 Oct
China (Mainland) GDP (Q3)
China (Mainland) Industrial Production (Sep)
China (Mainland) Retail Sales (Sep)
China (Mainland) Unemployment Rate (Sep)
China (Mainland) Industrial Capacity Utilization (Sep)
United Kingdom Inflation (Sep)
South Africa Inflation (Sep)
Eurozone Inflation (Sep, final)
United States Building Permits (Sep)
United States Housing Starts (Sep)

Thursday 19 Oct
Japan Trade (Sep)
Australia Employment Change (Sep)
South Korea BOK Interest Rate Decision
China (Mainland) House Price Index (Sep)
Malaysia Trade (Sep)
Indonesia BI Interest Rate Decision
United States Initial Jobless Claims
United States Existing Home Sales (Sep)

Friday 20 Oct
China (Mainland) Market Holiday
New Zealand Trade (Sep)
Japan Inflation (Sep)
China (Mainland) Loan Prime Rate (Sep)
Malaysia GDP (Q3, prelim)
Malaysia Inflation (Sep)
United Kingdom Retail Sales (Sep)
Taiwan Export Orders (Sep)
Hong Kong Inflation (Sep)
Canada Retail Sales (Aug)
Canada New Housing Prices (Sep)

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What to watch

Americas: US retail sales, industrial production, building permits data, Canada inflation

Following the release of Fed minutes, which outlined the indecision among Fed officials on whether another hike may be needed, we will be watching for more economic releases in the coming week, data that will help shape the Fed's views on the interest rate path. Specifically, US retail sales and industrial production figures will offer updates on GDP momentum, with latest PMI indications reinforcing the consensus expectations for slowdown in both counters.

Canada also updates inflation figures with CPI expected to have ticked higher in September, though core inflation may stay unchanged.

EMEA: UK inflation and labour market reports, Eurozone inflation and German ZEW survey

In Europe, inflation readings from both the eurozone and UK will be expected on Wednesday, the former being the final September figures. Both headline readings are set to have lowered from August, in line with the trends outlined by PMI selling price indices from the HCOB Eurozone PMI and S&P Global / CIPS UK PMI.

UK labour market will meanwhile be watched after the KPMG and REC UK Report On Jobs, compiled by S&P Global, revealed that the uncertain economic outlook continued to weigh on hiring decisions at the end of the third quarter.

APAC: BOK, BI meetings, RBA meeting minutes, China loan prime rate, Q3 GDP, retail sales, industrial production data, Japan inflation and trade figures

In APAC, central bank meetings unfold in South Korea and Indonesia with no changes expected from either.

Key data releases in the region meanwhile includes China's Q3 GDP and September's monthly activity figures. Indications from the Caixin PMI, compiled by S&P Global, showed growth momentum easing in the third quarter, reinforcing the consensus expectation that we will see slower annual GDP growth in Q3 at around 4.4%. Retail sales and industrial production performance will meanwhile moderate slightly in September according to forecasts.

Additionally, Japan's inflation reading will be released on Friday with the consensus expectation pointing to a slower 3.1% year-on-year (y/y) rise in prices. September's PMI data signalled that further easing of inflationary pressures may be expected for the Japanese economy.

Special reports

Global PMI Signals Near-term Downturn Risks Amid Falling Backlogs of Work - Chris Williamson

Taiwan's Exports Turn Positive in September 2023 - Rajiv Biswas

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