Macroeconomics: The Day Ahead for 31 October

Inflation data in the Eurozone and Japan, activity indicators in Japan, Canada’s monthly GDP and the US Chicago PMI surveys top the statistical agenda, with a smattering of central bank speakers also on offer. A lighter schedule of corporate earnings finds its focus in the energy sector via way of results from Chevron, Exxon Mobil and Canada’s Imperial Oil. There is also month end to contend with, as attention turns to next week, with the BoE meeting in focus, and the majority of forecasters looking for no change from 4.0%, though the decision will again be very finely balanced (another 5-4 vote possible), and a sizable minority of forecasters see a case for a further 25 bps rate cut. Better than expected growth data and surveys of activity (e.g. today’s jump in the Lloyds Business Barometer) make a marginal case for a rate hold, even though inflation is clearly on a downward trajectory, and private sector labour demand remains weak.

In terms of the rest of the overnight data, China’s NBS PMIs were weaker than expected, with a further slide in Export Orders driving down the Manufacturing PMI to 49.0, the year’s low and the weakest since December 2023, while the Services PMI remains close to a 3-year low. The trade truce with the US is unlikely to offer any solace to the manufacturing sector, and the pressing need to stimulate domestic demand is all too obvious. Japan’s Tokyo CPI was much higher than expected, accelerating to 2.8% y/y across all measures. The end of a water subsidy, some upward pressure on leisure/recreation prices, which can be quite erratic, were the primary driver of the upside surprise, even if Services CPI continues to remain relatively subdued at 1.6% y/y (up 0.1 ppt). That said, goods prices appeared to show some upward pressure from the weakness of the JPY, which argues against the BoJ waiting for initial indications on next year’s wage settlements. Japan’s activity data was mixed, with the stronger-than-expected 2.2% m/m rise in Industrial Production paced by a rise in chipmaking equipment and a further rise in Auto Output, while Retail Sales missed forecasts, posting a tepid 0.3% m/m rebound after falling a revised -0.9% m/m in August.