Macroeconomics: The Day Ahead for 20 October

  • UK dominates data and events schedule with Gfk survey, Retail Sales, PSNB and hefty by-election loss for Sunak’s Conservatives; Japan CPI, record y/y drop in German PPI also to digest
  • Brazil monthly GDP, Canada Retail Sales ahead; smattering of Fed speak and US corporate earnings; Middle East conflict, China property woes, US House speaker debacle cast very long shadow
  • U.K.: Retail Sales fall only in part weather related, GfK Consumer Confidence slide a reminder that cost of living crisis remains very real

EVENTS PREVIEW

The week ends on a subdued note in terms of data and events, with the UK headlining the statistical run via way of GfK Consumer Confidence, Retail Sales and PSNB, with yesterday’s by-election results also to digest, accompanied by Japan’s national CPI, German PPI, with only Brazil’s monthly GDP and Canada’s less than timely Retail Sales. There are a few more Fed speakers, but none are likely to add anything to what has already been said by Powell, Waller and the rash of other speakers this week. Amex and Schlumberger headline the run of US corporate earnings. Per se, the overarching themes of the conflict in the Middle East, the ongoing US House Speaker election debacle, China’s property woes and US/China tensions are more likely to provide the prompts for markets to react to, in what will remain choppy and volatile trading conditions, as best evidenced by US Treasuries and Crude Oil prices. Next week sees the pace of US corporate earnings pick up sharply, with many tech, commodity, energy and numerous other real economy behemoths reporting, as well as ECB (where the focus will be on what is said about PEPP QE reinvestment plans) and Bank of Canada policy meetings, and there will be this Sunday’s elections in Argentina to digest. The statistical schedule will be light in numerical terms, but has a number of first division data points including advance Q3 GDP readings in the US, South Korea and Spain, UK labour data (part II), G7 flash PMIs and German Ifo survey, CPI readings for Japan (Tokyo), Australia, Brazil and Mexico, as well as US Personal Income, PCE, Durable Goods, New and Pending Home Sales.

** U.K. – Sep Retail Sales & GfK Consumer Confidence **

– After the marginal upside surprise in CPI this week comes a timely reminder that the UK economy is likely to slip into a likely shallow recession over the autumn/winter period. The record drop in Consumer Confidence, paced above all by sharp drops in the Climate for Major Purchases and the 12 month Economic Outlook underlines that the cost of living crisis and the sharp rise in interest rates continue to bite hard. The relatively warm weather in September weighed heavily on Clothing & Footwear sales (-1.6% m/m), but the worse than expected -0.9% m/m drop in Retail Sales was in truth broad based, as can be seen from the attached table, with only Food and Auto Fuel posting gains. Coming on the back of the heavy defeats for the ruling Conservatives in yesterday’s two by-elections, it shows the scale of the challenge for PM Sunak and Chancellor Hunt to turn around the economy ahead of a general election, which must be held by January 2025.

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