Written Commentary
The Ghost in the Machine: Q3 2026 Macro Outlook
September 28, 2026
Increasing turmoil and geopolitical tensions casts a long shadow as markets hone in on Q3 earnings season; digesting UK jobs report, German PPI jump, smattering of central bank speakers; GE, GM and SpaceX top earnings run.
U.K.: unexpected Payrolls rise, drop in Unemployment Rate add to case for November rate hike, even if improvement may signal stability rather than an upturn in labour demand.
Canada: CPI still well behaved, but BoC quarterly surveys point to a rebound ahead, BoC likely to hike rates next week.
EVENTS PREVIEW
Markets Focus on Earnings, Economic Data and Geopolitical Developments
Even if markets are not in a meltdown, turmoil remains the watchword, be that the widespread social unrest in Europe, above all France, the conflicts in the Middle East and Ukraine, the unseemly political tensions between the US and Ukraine, or the glaring flop of South Korean AI data centre infrastructure provider Elice’s IPO, with shares falling 32% on its debut. In terms of the ‘regular’ macro schedule, there are the latest UK labour data to digest, while the focus then turns to the day’s run of US corporate earnings that includes General Electric, General Motors, Halliburton and SpaceX. There is also the surge in German PPI to digest ahead of the ZEW survey, while the US looks to Housing Starts and Pending Home Sales, after yesterday’s NAHB Housing Market Index dropped to 29, its lowest reading since 2012 (leaving aside Covid aberrations).
Canada: Inflation Expectations Remain in Focus
While yesterday’s Canadian CPI was weaker than expected on both headline and core measures, the BoC’s key quarterly business and consumer surveys showed businesses reporting increased cost pressures, with around half intending to pass through rising input costs, while consumer inflation expectations jumped to 3.91%. Given BoC Macklem’s comments last week indicating greater concern about high headline inflation, an initial 25 bps rate hike next week looks increasingly likely, especially as the BoC survey responses were largely collected before the latest breakdown in trade negotiations with the US.
U.K. Labour Market Data Exceeds Expectations
While it would be premature to suggest that UK labour demand has turned a corner, today’s report was much better than expected, with a modest 13K rise in HMRC Payrolls against expectations of -8K and August revised to +1K from -26K, breaking a long run of weakness. An unexpected drop in the Unemployment Rate to 4.7% against forecasts of a slight rise to 5.0% was paced by a sharp rise in the August Employment Rate to 61.3% from 60.7%, and contrasts sharply with prior surprise falls that were due to a fall in labour market participation. Caution is required as the single-month data are notoriously volatile and subject to revision. Wage growth remains well contained, with Private Sector Earnings ex-Bonus holding at 3.0% y/y as expected, while a further 13K drop in Vacancies and a 30.3K rise in the Claimant Count (albeit the August rise was revised down by 20K) also advise against over-interpreting the stronger elements. That said, and regardless of tomorrow’s expected CPI rise, today’s labour data and last week’s GDP strengthen the case for a November rate hike, as well as easing some of the pressure on Chancellor Healey in next week’s budget.
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