- Limited UK data, but consumer borrowing has potential to show household support for recovery
- US Q3 GDP has the potential to look flattering, but hide true economic cost of COVID
- No big move expected at ECB monetary policy meeting but dovish tone likely to prevail
The week starts with the German IFO Business Climate reading for October. The recovery trend that has been seen over the last six months is expected to be reversed and given last week’s PMI readings it seems clear that confidence is now ebbing away. This all stands to create a more challenging backdrop for the ECB when they convene later in the week.
Also on Monday, US New Home Sales for September are set for release. Again, the up-trend which was seen after the initial shock of COVID-19 is set to be reversed, although given the rampant activity from the sector of late, this in isolation shouldn’t be too great a cause for concern.
Sticking with the US, on Tuesday Durable Goods Orders for September will be published. There’s a real risk the month-on-month figure could slide into negative territory, suggesting that the immediate bounce back seen after the COVID-19 slump has now run its course. With the aviation industry still reeling, stripping out the transport sector has the potential to make slightly more comfortable reading but this arguably reflects a global slowdown, not just an America-centric one.
A flurry of retail insights from the Eurozone will emerge on Wednesday. French Consumer Confidence for October is set to be rattled and forecasts of a print of just 91 would mean a worse situation than was observed in the first wave of the COVID pandemic. This will be followed by Spanish Retail Sales figures for September, again tipped to slide into negative territory. With new lockdowns being imposed across the country, this number could well deteriorate further before the year end.
Thursday sees a busy day on the economic calendar, with German Unemployment for October first up. There are a few metrics due for release here but the picture is set to be universally bad, with very modest job gains of recent months set to be reversed, something which would underline the deteriorating picture of the Eurozone economy.
Next up is UK Consumer Credit data for September. Borrowing contracted during the depths of lockdown but has started to grow again since. Further expansion here will provide some suggestion of confidence amongst the general public, but failure to hit that forecast of around £0.7bn may be cause for concern.
The early US Q3 GDP reading may be one to watch, amidst expectations that this will flatter the economy – and potentially provide fresh ammunition for Donald Trump’s re-election hopes. The 31% quarter-on-quarter slump seen three months ago is likely to tip into expansion of a similar size, but even so the economy will remain badly bruised from an annual outlook.
Rounding off a busy day on Thursday, the European Central Bank will announce their latest monetary policy followed by a press conference. This is likely to come at the end of a week of disappointing Eurozone macroeconomic data, although many commentators feel that it’s unlikely to generate any meaningful response – for now. Dovish tones are to be expected but given the bleak outlook it’s difficult not to think further policy easing will be seen before the year end.
And to finish the week, Friday sees the flash Eurozone Q3 GDP data released. A similar – if less pronounced – pattern is expected as we’ll have seen from the US, with Q2 declines being reversed. The annualised figure will start to give some indication as to just how badly hit the currency bloc’s economy will be – if those forecasts of an 8% year-on-year decline are met, this may actually be cause for cheer.
Article by Tony Cross of Monk Communications. This article first appeared in Octo
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