Macroeconomics: The Day Ahead for 25 October

What will be a busy week gets off to a very slow start, with Germany’s Ifo Business Climate and the US Dallas Fed Manufacturing surveys the only highlights on the statistical schedule, as EU Energy Ministers hold an extraordinary meeting to try and find an unlikely common ground to deal with the energy crisis. (see previews below in Week Ahead). There is a smattering of central bank speakers including ECB’s de Cos and BoE’s Tenreyro, while HSBC, Facebook and Kimberly-Clark head a relatively modest run of corporate earnings, and the EU auctions 7-yr debt.

The Week Ahead – Preview: 

The new week brings month end as well as a very busy run of data and major central bank meetings, as the US earnings season moves into top gear with 165 S&P 500 companies reporting, including many ‘big tech’ companies, and a very busy run of earnings in Asia, Europe and Latin America elsewhere, providing some microeconomic perspectives on the global economy’s current challenges. Advance Q3 GDP readings from the US, Eurozone, France, Germany, Italy, Spain, Mexico and South Korea top the schedule, which also has US Consumer Confidence, Durable Goods, House Prices, New & Pending Home Sales, Goods Trade Balance, Personal Income and PCE. October provisional CPI readings top the rest of the run of Eurozone data, with Germany looking to the Ifo survey and Unemployment, the UK has mortgage and credit data to accompany Wednesday’s much anticipated Autumn Budget, while the usual month end of activity data and Tokyo CPI feature in Japan, Australia has Q3 CPI, Canada monthly GDP and Brazil IPCA-15 inflation. The Bank of Canada leads off the run of G20 central bank meetings, which includes the BoJ, ECB and Brazil’s BCB. In the commodity space, energy supply and demand and the various power crises around the world will continue to be the key overarching theme, along with a very busy run of corporate earnings from energy, mining and industrial capital goods manufacturers, and the EU’s extraordinary meeting of energy ministers amid very divergent views on how to combat the crisis. Given the sheer volume of inputs, volatile price action and often very fickle and fluid market reaction seems likely, even if month end is also likely to provide some distortions, and perhaps dampen reaction to some data and events.

While markets’ attention is already on Q4 and the outlook for 2022 growth, the week’s run of Q3 GDP readings may well throw up some market moving surprises, as yr/yr performances revert to something akin to trend rates, after the hefty base effect and US fiscal stimulus distortions of recent quarters. Given the scale of supply chain disruptions, inventories may prove to be the biggest wildcard, and will need careful monitoring. As the overview table below highlights, the Euro area will see the strongest performance, and it is worth emphasizing that it is Italy that is expected to have seen the strongest performance over the past 2 quarters.