The coming week is set to be a busy one both in terms of data and for central bank activity. The Fed will hold its October FOMC meeting, while the Bank of Japan and Reserve Bank of New Zealand will also meet. The key indicators to watch for will be US and UK third quarter GDP and Eurozone flash CPI.
Starting the week are the German IFO survey for business confidence and expectations. It will be interesting to see how the IFO survey holds up in October given the recent confidence knock from the Volkswagen scandal. On Thursday, flash German inflation and unemployment figures will be released ahead of the euro-wide data on Friday. Eurozone flash CPI is forecast to pick-up to 0% y/y in October after unexpectedly dipping back into deflation in September at -0.1%. Inflation in the euro area reversed back downwards again in June after recovering earlier in the year and this has been worrying the European Central Bank who would like to see inflation rise closer to its target. Meanwhile unemployment, also out on Friday, is forecast to stay unchanged at 11.0% in September.
It will be a data-packed week for the US, starting off with new home sales on Monday, followed by durable goods orders on Tuesday. September durable goods orders are forecast to drop by 1.5% m/m after falling by 2.3% in August. On Wednesday, the FOMC will conclude its two-day meeting to announce its latest policy decision. A rate rise has been pretty much ruled out for October by the markets but it is likely that the Fed will provide signals for a possible December hike if the FOMC is moving in that direction. A majority of economists still expect the Fed will act in December. On Thursday, the initial estimate of third quarter GDP is released. It is forecast the US economy expanded at an annualized rate of 1.7% in the third quarter – much slower than the 3.9% rate seen in the second quarter. More US data will come in the form of September personal income and consumption figures. Both are expected to rise by 0.2% m/m, maintaining the steady improvement throughout the year.
The UK will also release third quarter GDP data and similarly to the US, growth is expected to slow. The first estimate of third quarter growth is forecast to come in at 0.6% q/q when published on Tuesday. A weaker figure could push the pound lower after its recent strong performance on the back of positive data.
The Bank of Japan will hold its second monetary policy for October next Friday when it will publish its updated growth and inflation outlook. It is expected the Bank will cut its projections for 2015 and 2016 but analysts are mixed whether the BoJ will repeat last year’s shock move of injecting trillions more yen into the economy through its QE program. With the growth outlook worsening on slowing exports and inflation dropping back to zero, the BoJ has so far said it remains confident that economic growth will continue at a moderate pace and inflation will rise to its 2% target by September 2016. However, industrial production and inflation data released before the BoJ meeting may give the central bank reason to worry. Preliminary September industrial production data out on Thursday is forecast to show a drop of 0.5% m/m – the third month in-a-row of falling output. Inflation is not expected to fare much better on Friday with core CPI forecast to drop to -0.2 y/y in September.
Finally, the Reserve Bank of New Zealand will announce on Wednesday its latest monetary policy decision. The RBNZ had cut rates three times this year as the economy has been hit by falling commodity prices and turbulence in emerging market economies. But no change is expected at next week’s meeting as the central bank sounded less dovish in its last statement and it assesses the impact of its previous cuts.