Although next week does not feature any dramatic highlights, there will still be some useful updates with respect to the US consumer and industrial output, the UK labor market and inflation and Eurozone final inflation and industrial output.
Starting with the Eurozone, one of the key worries of the markets currently concerns the economic outlook of the region as well as the threat of deflation. According to Draghi, the ECB appears ready to pump more stimulus in the economy because of the deteriorating economic situation and falling inflation. In this respect, final inflation numbers for September are expected to confirm the 0.3% year-on-year preliminary inflation figure (the previous month was 0.4%), but also the retreat of core inflation to 0.7% from 0.9% in August. Final inflation estimates will be released on Thursday, as will Eurozone trade balance and it will be interesting whether the weaker euro will slowly start to help exports. In addition, August industrial output data on Wednesday and the German Zew investor sentiment survey will also give some indications about whether the region is slowing down and by how much.
In the United Kingdom, September’s inflation numbers on Tuesday and August / September employment indicators on Wednesday will be important for shaping monetary policy. As UK inflation eased back to 1.5% in August, it is expected to drop further in September to 1.4%, slightly distancing the prospect of near-term interest rate hikes. On the other hand, unemployment is also expected to drop slightly to 6.1% in August from 6.2% the previous month, while the claimant count of unemployed is expected to drop further by 33 thousand after August’s 37 thousand drop. Overall the data should point to a firming of the UK labor market but also to a lack of wage or price pressures, which should grant the Bank of England some flexibility on when to raise interest rates.
In the United States, the highlight of the week will probably be Advance Retail Sales for September, which are expected to be flat month-on-month after a surprising 0.6% gain the previous month. Retail sales have been advancing at a 4-5% year-on-year rate during the past 6 months. University of Michigan preliminary consumer confidence will also help to reveal the consumer’s spirits in the United States. Industrial output is expected to rebound to show a 0.3% gain in September after a contraction of 0.1% the previous month. Any negative impact on the manufacturing sector from weaker global economic growth and a strong dollar could be reflected in a weaker-than-expected figure, partly justifying the concerns contained in the FOMC minutes released the past Wednesday (weak global growth and a strong dollar).
Other key data expected next week are Chinese trade balance (Monday) and inflation (Wednesday), business and consumer confidence surveys out of Australia and New Zealand and Canadian inflation (Friday).