Economic data will move to the forefront next week as the focus moves away from central bank meetings to price, employment and consumer spending indicators. Canada, the Eurozone, the UK and the US all release CPI numbers. Jobs reports are due from Australia and the UK, and retail sales figures will be published in China, the UK and the US. GDP data will also attract attention as investors get the first glimpse of third quarter economic performance in Japan.
Australian wages to remain subdued
Like in most advanced economies, a tightening labour market has not translated to higher wages in Australia, raising concerns about the negative impact of household debt rising faster than incomes. The lagging wage growth has dampened consumer spending, which, along with the weak outlook for inflation, has pushed back expectations about the timing of a rate hike by the RBA, weighing on the Australian dollar. Wage data are due on Wednesday and will be followed by employment numbers on Thursday.
Canadian inflation eyed
The Bank of Canada’s governor, Stephen Poloz, reiterated this week that the Bank’s next move will be data dependent. While recent Canadian data has pointed to ongoing strength in jobs growth and consumer spending, inflation isn’t picking up as quickly as had been anticipated and economic growth in the second half of the year is heading for a marked slowdown compared to the first half. This has led the BoC to take a more cautious approach on further rate hikes over the coming months. October CPI readings on Friday will therefore be watched carefully for any signs that inflation is accelerating. A stronger-than-expected figure could help the Canadian dollar move further away from its recent 3½-month low versus its US counterpart.
Investment in China likely slowed further in October
Fixed asset investment in China hit a 17-year low in September and is expected to slow further in the year-to-date to October, to 7.4% on an annual basis. The data due on Tuesday will be released alongside industrial output and retail sales figures. Although recent indicators suggest the Chinese economy will see only a mild slowdown in the second half of the year, a weak batch of data next week could nevertheless dampen risk sentiment.
Japan expected to post longest growth streak since early 2000’s in Q3
In the second quarter, Japan recorded its longest stretch of uninterrupted growth in 11 years. If on Tuesday, GDP data shows another quarter of positive growth for the three months that ended in September, Japan would have posted its seventh straight quarter of growth, making it its longest streak of expansion since the turn of the century. The achievement may lift the booming Nikkei 225 index to fresh 25-year highs but is unlikely to see much of a reaction in currency markets as the Bank of Japan is nowhere near in scaling back its stimulus program.
Eurozone economy shines but inflation remains elusive
The second estimate of GDP data on Tuesday is expected to confirm that the Eurozone economy grew by 0.6% quarter-on-quarter in the September quarter. The European Commission this week revised up its projection of growth in the euro area in 2017 from 1.7% to 2.2%, but revised down its forecast for inflation from 1.6% to 1.5%. The final reading of October inflation is also due next week, on Thursday. CPI is expected to have risen 1.4% on an annual basis last month, unchanged from the preliminary figure but down on the prior month’s 1.5% rate. Other data to watch next week include the ZEW economic sentiment index out of Germany and Eurozone industrial output numbers, both on Tuesday. With the ECB recently signalling that it does not expect to start raising rates by late 2018 at the earliest, the euro may struggle to see much of a response from the data.
Big week for UK data
Major UK indicators next week face the risk of getting overshadowed by growing political concerns, as Brexit talks conclude their sixth round without much progress and May’s government loses its second key minister in a week. However, with many analysts taking the view that the Bank of England’s 25bps rate hike earlier this month was a one-and-done move, upside surprise to UK data could lift sterling. The first item on the UK calendar is inflation on Tuesday. It will be followed by unemployment and wage figures on Wednesday and retail sales numbers on Thursday. Inflation is expected to have hit 3.1% in October. A figure above 3% would oblige the BoE Governor Mark Carney to write to the government to explain why it has overshot its upper target. The focus in the employment report will be average earnings as continued weakness in pay growth would signal no end in sight to the income squeeze for consumers, while another dire month for retail sales in October would point to a poor start to the third quarter. Retail sales are forecast to post their first year-on-year decline since 2013 in October.
Busier calendar for the US
After a quiet week, the US looks set for a packed calendar in the coming seven days. However, with a December rate hike already fully priced in, the data may not cause much excitement in the markets, especially as the immediate focus is on the tax plan’s passage in Congress. However, more robust numbers could provide the dollar some support should the Senate and the House fail to work out their differences over the tax reforms. The first key data out of the US next week is CPI on Wednesday. Annual inflation is forecast to ease to 2.0% in October, with the core rate holding steady, at 1.7%. Retail sales are also due on Wednesday and are expected to show sales moderating in October after a 1.6% surge in September. Other US data likely to attract attention next week are October producer prices on Tuesday, the Empire State manufacturing index on Wednesday, industrial output and the Philly Fed manufacturing index on Thursday, and building permits and housing starts on Friday.
