Economic forecast for the week ahead: week of October 3, 2022

The following is an excerpt from the latest S&P Global Market Intelligence Weekly Economic Forecast. To get the full report, click on the ‘Download full report’ link.

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With global recession risks rising, upcoming PMI survey data for the world’s major economies will come under close scrutiny in the coming week, as will the US Non-Farm Payroll report. As the RBA is the main event from a policy setting perspective, markets will closely monitor potential Bank of England interventions amid volatility in gilt and FX markets, as well as UK political developments.

The week starts with a rush of manufacturing PMIs. Markets will assess the potential for an easing of global factory price pressures following a recent moderation in supply chain pressures and a weakening demand environment. However, weakening demand, ongoing COVID-19 containment measures in mainland China, uncertainty regarding Russia, and energy supply issues in Europe remain major concerns for the economic outlook.

Later in the week comes the service sector PMIs, where the impact of the cost of living crisis on consumer spending will be a key development to watch. However, the surveys will also help to understand the impact of tightening financial conditions on financial services around the world (see box), as well as any pass-through of rising prices to wages.

The week ends with the US jobs report, for which markets expect non-farm payroll growth to slow from a 315k gain in August to 250k in September. That would be the worst performance since December 2020, although the slowdown in the pace of job creation partly reflects a natural moderation in hiring amid the current tight labor market. The unemployment rate is expected to remain at 3.7%. Average hourly earnings growth is forecast to remain at 0.3%. Any stronger-than-anticipated labor market trend will naturally add to the growing view of more aggressive Fed tightening and, in particular, a more restrictive spike in the funds rate that may need to hold for longer.

In a busy week, also keep an eye on US factory orders data and industrial production figures from Germany, France and Spain, as well as Japan’s Tankan survey.

Financial services lead the global recession

PMI survey data released next week will provide timely insights into macroeconomic trends around the world at the end of the third quarter, covering both manufacturing and services. However, the survey data can also be used to analyze economic trends by industry sector. Data for August showed that the industry exerting the biggest drag on global growth now is financial services, with property activity falling particularly sharply, reflecting the recent tightening of financial conditions. However, there has also been a big deterioration in the performance of consumer-facing service sectors, and in particular travel and tourism, where a post-vaccine demand rebound has stalled globally amid rising of energy costs and the rising cost of living, which has diverted spending away from non-essentials. Cars have also continued to suffer amid supply shortages. September data will be

published by S&P Global.

Daily key events

Monday October 3

Global Manufacturing PMI Surveys (September)

Japan Tankan Survey (Q3)

US ISM Manufacturing Survey (Sep)

Indonesian inflation (September)

Swiss inflation (September)

Indian trade balance (September)

Brazil trade balance (Sep)

tuesday october 4

Australian Home Loans, Building Permits (Aug)

Australia RBA Policy Decision

Unemployment Spain (Sep)

Eurozone PPI (August)

US Factory Orders, JOB (Aug)

Russia GDP (August)

Wednesday October 5

World Services and Composite PMI Surveys (September)

US ISM Non-Manufacturing Survey (Sep)

South Korea Inflation (September)

New Zealand RBNZ Policy Decision

Philippines inflation (September)

Thailand inflation (September)

Australian Retail Sales (Aug)

German trade balance (August)

Industrial production of France (Aug)

ECB non-monetary policy meeting

Consumer Confidence Spain (Sep)

US MBA Mortgage Applications/30 Year Mortgage Rate

Brazil Industrial Production (Aug)

US Trade Balance (Aug), ADP Employment (Sep)

Canada Trade Balance, Building Permits (August)

Poland political decision

Thursday October 6

Global PMI detailed sectoral data (September)

Australia Trade Balance (August)

Taiwan inflation (September)

Dutch inflation (September)

Germany Factory Orders (Aug)

Industrial production Spain (Aug)

Construction PMI in the UK and the eurozone (September)

Euro zone retail sales (August)

Retail sales in France (August)

US Unemployment Claims

Friday October 7

Household spending in Japan (August)

Germany Industrial Production (Aug)

House prices in Halifax, UK (September)

Trade balance of France (August)

Italy Retail Sales (Aug)

Canadian Labor Market Statistics (September)

US employment report (September)

US consumer credit, wholesale inventories (Aug)

*Indices press releases produced by S&P Global and relevant sponsors can be found

what to see

Americas: US Nonfarm Payrolls, Unemployment & Wages, Factory Orders, Consumer Credit, PMI & ISM

The US week begins with the PMI and ISM surveys and ends with the employment report, which provides a wealth of new information on the path of economic growth and inflation trends.

Lightning PMI data showed a weak September that rounded off the worst quarter since 2009, barring the initial lockdowns due to the pandemic, albeit with an evident cooling of the slowdown in the services sector, linked in part to the easing of inflationary pressures as consumer confidence touched background. Meanwhile, the ISM non-manufacturing surveys have remained buoyant, so a drop is likely to be seen in September.

Slower growth is also expected for nonfarm payrolls, with a gain of 250k currently according to consensus versus a gain of 315k in August. Also watch out for US factory orders, job postings and consumer credit data, in addition to Canadian labor market statistics.

Europe: PMI manufacturing, construction and services, retail sales, industrial production and business updates

The final manufacturing and services PMIs will be updated for the
United Kingdom
and other struggling Eastern European countries, along with detailed PMI sectoral indices to provide additional insights into economic trends amid recession risks across the region. Industrial production data from Germany, France and Spain will also be eagerly awaited to gauge the impact of the region’s energy crisis on factories. Also look for UK house price data plus German factory orders and trade figures, as well as Eurozone retail sales and a political decision in Poland.

Asia-Pacific: RBA & RBNZ Interest Rate Decisions, Mainland China & Other APAC PMIs

PMI data for mainland China will be high on the agenda amid concerns global trade growth is slowing while domestic demand remains subdued due to ongoing COVID-19 containment measures. Other PMI data for APAC economies have shown mixed trends, with India and Vietnam notably resisting a broader global slowdown. In Japan, services growth is likely to have been boosted by the easing of COVID restrictions, while the factory PMI and Tankan survey will be scrutinized for the impact of the weakening yen on goods exports.

The main policy meeting of the week takes place in Australia, accompanied by a meeting of rate regulators in New Zealand. The RBA has risen in each of the last five months to bring its policy rate to 2.35%, but inflation has continued to rise and the labor market remains tight. Therefore, another hike, potentially to 50 basis points, is widely anticipated.

Special reports:

United States | Chris Williams

Singapore | Rajiv Biswas

© 2022, IHS Markit Inc. All rights reserved. Total or partial reproduction is prohibited without permission.

Purchasing Managers’ Index™ (PMI™) data is compiled by IHS Markit for more than 40 economies worldwide. Monthly data is derived from surveys of senior executives from private sector companies and is only available by subscription. The PMI data set features a main number, which indicates the overall health of an economy, and sub-indices, which provide information on other key economic drivers, such as GDP, inflation, exports, capacity utilization, employment and inventories. PMI data is used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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