Macroeconomics: The Day Ahead for 27 September

  • Digesting BoJ July minutes, China Industrial Profits, French & German Consumer Confidence on busier day for statistics, Eurozone M3 and US Durable Goods ahead; light day for central bank speakers; UK, German and US to sell debt
  • US Durable Goods: aircraft to weigh on headline, core measures seen eking out marginal, but business investment in non-IRA/CHIPS acts supported sectors weak
  • Japan: deep divisions on BoJ board on primary risk on inflation all too evident in July minutes
  • Month and quarter end may prompt volatility given hefty skews in positioning


In contrast to the start of the week, today’s schedule puts the focus a little more on data, with the BoJ little in the way of central bank speakers, while on the policy decision front, the Czech National Bank is expected to hold rates again, after the Bank of Thailand unexpectedly hiked rates a further 25 bps. There are China Industrial Profits (improving but mostly due to base effects) and Australian CPI (in line with forecasts, and likely to keep RBA on hold) along with French and German Consumer Confidence (both weak and below forecasts) to digest, while ahead lie Eurozone M3 and US Durable Goods Orders. Govt bond supply is again quite plentiful with the UK selling £750 Mln of 50-yr, Germany EUR 4.0 Bln of 10-yr, the US $49 Bln of 5-yr and $24 Bln of FRN 2-yr, and Canada C$3.0 Bln of 10-yr. End of month/quarter flows are likely to assert themselves, and after a torrid few weeks in bonds and equities, and with some quite heavy positional skews in bonds, equity indices and oil, some anomalous and volatile price action appears likely. The July BoJ minutes (the meeting at which it widened the 10-yr YCC band to 100 bps) underscore that the board is quite heavily divided, on the one side there are those fearful of inflation bursting higher as it has done in Europe and North America, while others are far more concerned that the weak wage growth trend of recent decades will reassert itself, and per se reluctant to exit easy monetary policy. This debate is likely to continue well into 2024, though the primary risk remains that the latter group starts to accept that an exit is necessary, though it is also clear that there is no consensus on how the exit process should be managed in practice. Over in the US, Biden’s decision to back the striking autoworkers looks to be an electoral, given that Trump is also due to visit autoworkers this week, but heightens the risk of a more protracted strike.

** U.S.A. – Durable Goods Orders **

A small drop in aircraft orders is expected to push headline orders down 0.5% m/m, while core measures are seen eking out a very tepid 0.1% m/m increase. What will again likely be very evident is that investment in areas supported by the incentives contained in the Inflation Reduction Act (IRA) and CHIPS act, but in other areas the uncertainty about the economic outlook is making companies very reluctant to invest, above all given tighter financing conditions.

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