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MNI Global Week Ahead - US CPI and UK Labour Market Data

The week ahead is headlined by US CPI.
Story

MNI (LONDON) - THROUGH THE WEEK - China Economic Data

Next week's data will give an overview as to whether the impacts of the stimulus are beginning to filter through to the economic data.  October inflation data is due on Saturday, with CPI growth forecast to remain at 0.4% Y/Y. During the week, aggregate financing YTD and new yuan denominated loans will give a snapshot of demand for credit, a measure of individuals and company's willingness to invest given the outlook for the economy. With the raft of stimulus measures announced thus far being predominantly focused on the property sector and; the encouraging data out on new home sales; it is anticipated that both of these releases will be strong and current surveys suggest a meaningful increase. Of interest also will be new and used home prices month on month.  There has been a multi year decline for the property sector and with buyers emerging post stimulus, chances are we may start to see some form of bounce for property prices.  The other two key data releases will be industrial production and retail sales.
 
TUESDAY - UK September/October Labour Market Data 
 
UK labour market data remains in focus despite the MPC noting that it favours a “gradual” cutting cycle. The latest MPR forecast looks for private sector regular AWE to come in at 4.75%Y/Y in the 3-months to September, a little below the 4.83%Y/Y forecast it made 3-months prior), but a little above the 4.7% Bloomberg consensus and August print of 4.73%. This is the key figure in our view, with public sector pay (and total pay) a more lagging indicator. The unemployment rate is forecast at 4.168% by the BOE (4.1% Bloomberg consensus), 3.99% in August. Given the volatility (and unreliability) of the LFS data, we don’t place too much weight on the unemployment rate, but we do think there is a potential for a decent market move if pay data surprises either higher or lower.
 
WEDNESDAY - US October CPI
 

Wednesday’s CPI inflation report for October headlines the US macro calendar next week. Consensus looks for core CPI inflation of 0.3% M/M after again surprising higher than expected with 0.31% M/M in September. Initial unrounded estimates that we’ve seen suggest this is expected to be a “genuine” 0.3 print with an early average a little above 0.30%. Used cars are expected to provide a sizeable boost. Shelter is expected to hold onto much of its latest moderation although it remains at rates that are above pre-pandemic norms. Core services ex-housing will again be watched having surprised higher than any estimate we’d seen for September but in a move driven by CPI-specific categories that didn’t fully translate into core PCE and limited the market reaction. PPI follows on Thursday and could have important core PCE implications. With Fed Funds currently pricing about 17bp of cuts for the December decision, we expect sensitivity to surprises in either direction although labor data arguably remains in the driving seat for now.

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MNI (LONDON) - THROUGH THE WEEK - China Economic Data

Next week's data will give an overview as to whether the impacts of the stimulus are beginning to filter through to the economic data.  October inflation data is due on Saturday, with CPI growth forecast to remain at 0.4% Y/Y. During the week, aggregate financing YTD and new yuan denominated loans will give a snapshot of demand for credit, a measure of individuals and company's willingness to invest given the outlook for the economy. With the raft of stimulus measures announced thus far being predominantly focused on the property sector and; the encouraging data out on new home sales; it is anticipated that both of these releases will be strong and current surveys suggest a meaningful increase. Of interest also will be new and used home prices month on month.  There has been a multi year decline for the property sector and with buyers emerging post stimulus, chances are we may start to see some form of bounce for property prices.  The other two key data releases will be industrial production and retail sales.
 
TUESDAY - UK September/October Labour Market Data 
 
UK labour market data remains in focus despite the MPC noting that it favours a “gradual” cutting cycle. The latest MPR forecast looks for private sector regular AWE to come in at 4.75%Y/Y in the 3-months to September, a little below the 4.83%Y/Y forecast it made 3-months prior), but a little above the 4.7% Bloomberg consensus and August print of 4.73%. This is the key figure in our view, with public sector pay (and total pay) a more lagging indicator. The unemployment rate is forecast at 4.168% by the BOE (4.1% Bloomberg consensus), 3.99% in August. Given the volatility (and unreliability) of the LFS data, we don’t place too much weight on the unemployment rate, but we do think there is a potential for a decent market move if pay data surprises either higher or lower.
 
WEDNESDAY - US October CPI
 

Wednesday’s CPI inflation report for October headlines the US macro calendar next week. Consensus looks for core CPI inflation of 0.3% M/M after again surprising higher than expected with 0.31% M/M in September. Initial unrounded estimates that we’ve seen suggest this is expected to be a “genuine” 0.3 print with an early average a little above 0.30%. Used cars are expected to provide a sizeable boost. Shelter is expected to hold onto much of its latest moderation although it remains at rates that are above pre-pandemic norms. Core services ex-housing will again be watched having surprised higher than any estimate we’d seen for September but in a move driven by CPI-specific categories that didn’t fully translate into core PCE and limited the market reaction. PPI follows on Thursday and could have important core PCE implications. With Fed Funds currently pricing about 17bp of cuts for the December decision, we expect sensitivity to surprises in either direction although labor data arguably remains in the driving seat for now.

Keep reading...Show less