Week Ahead Economic Preview

10 Nov 2017 Bernard Aw

The focus next week is on economic growth and price trends for major economies, with a number of countries releasing third quarter GDP figures as well as inflation data. Alongside this comes a worldwide release of the tri-annual IHS Markit Business Outlook surveys, which will provide important insights into business expectations for the year ahead.

Meanwhile, UK wage and inflation statistics will be key data releases for guidance on Bank of England policy, while US consumer resilience will be assessed through updated retail sales data. Other key data highlights include Chinese fixed investment, retail sales and factory output. Elsewhere, Bank Indonesia will decide on monetary policy.

Euro area GDP and inflation, UK wages

With October PMI data indicating a solid eurozone growth spurt at the start of the fourth quarter, alongside higher inflationary pressure, analysts are eager for official data to confirm the positive developments. As such, the second estimate of euro area third quarter GDP and inflation data for October will be closely monitored. Germany and Italy will also be releasing third quarter GDP figures.

Official data is widely expected to show UK inflation breaking over the 3% level in October, meaning Bank of England governor Mark Carney will need to write a letter of explanation to the Chancellor of the Exchequer. However weaker growth of input costs indicated by October PMI surveys suggests that some pressure may soon come off selling price inflation. Official wage data will also be released, providing a key indicator of any likely future rate hikes, with further policy tightening contingent on signs that inflation is feeding through to higher pay.

In the US, analysts will look to updated data on inflation and retail sales to gauge price pressures and the resilience of the consumer. There have been signs of a drop in inflationary pressures since a hurricane-related surge in prices seen in September. Having been buoyed by supply chain disruptions in prior months, PMI surveys showed inflationary pressures eased markedly at the start of the fourth quarter.

Meanwhile, a comparison with PMI consumer goods orders suggests that US retail sales growth is likely to have slowed in October.

Japan and China

In Japan, the publication of third quarter GDP numbers is one of the important data releases, alongside industrial production and producer inflation. Recent Nikkei PMI data indicated that the Japanese economy lost some growth momentum in the three months ending September, although the latest survey signalled a strong start to the closing quarter of 2017.

China watchers will meanwhile be eyeing a host of data releases for October, including retail sales, industrial output, fixed asset investments, credit and monetary growth. Trends in industrial production and retail sales will be assessed for the strength of domestic demand, with Caixin PMI surveys signalling slower growth but rising prices in October amid evidence that stretched supply chains.

Elsewhere, third quarter GDP numbers are published for Malaysia and the Philippines. PMI surveys indicate that annual GDP growth for Malaysia is expected to slow slightly from 5.8% in the previous quarter. Latest data have indicated that manufacturing remained fragile at the start of the fourth quarter, posing downside risks to growth towards the end of the year.

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Bernard Aw, Principal Economist, IHS Markit
Tel: +65 6922 4226


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