- Will German consumer confidence show its economic recovery outpacing the rest of the Eurozone?
- US Durable Goods orders set to slow but dip could be short lived
- UK Consumer Borrowing in focus, with growth here pointing towards improved confidence.
On Monday, German Ifo Expectations for October will be published. These are set to hold close to the September level of 97.3, reflecting both concerns over inflationary pressures, supply chains and uncertainty as to what happens next. There are hopes that consumer confidence is picking up – that will be confirmed later in the week – but with the Eurozone economy still in a difficult place, this will inevitably result in some kind of drag for Germany.
Tuesday’s key release to watch will be the US House Price Index for August. On an annualised basis, growth is set to pick up slightly from the already eye-popping 19.2% recorded a month ago. That’s well ahead of inflation and the impact of rising interest rates on new mortgage holders has the potential to hit hard, but the New Home Sales data for September will also be published. This is likely to show a rapid deceleration in transaction numbers, suggesting that the pace of price growth here is likely ready to stall – something that will offer a degree of relief to policymakers.
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Forward looking German Consumer Confidence data for November will be issued on Wednesday, with expectations being that the positive print recorded in October will continue to be built upon and that sentiment is returning to pre-pandemic levels. With hopes running high that the country won’t be hit badly by another wave of COVID infections, this is likely to lend some support, but care needs to be taken to ensure that Germany doesn’t start overly outperforming the rest of the Eurozone too quickly.
US Durable Goods orders for September are also set to be released on Wednesday. There are expectations of a month-on-month decline being posted although if this can be explained away by short term supply chain disruption, it’s unlikely to be much cause for concern in the market. Forecasts suggest a reading of around -0.2% will be recorded, down from the 1.8% seen in August but it’s the longer term trend that will be of most interest here.
Thursday sees the European Central Bank make its call on interest rates. There’s no expectation of any change yet, even with inflation running quite hot and consensus seems to be that the ECB will be one of the last major banks to move here, either in the latter part of 2023 or beyond. As always expect the press conference to be closely followed and the challenge will be placating German savers who seem likely to be left on the back foot with inflation outstripping interest rates by a wide margin for some time yet. The ECB is still left to walk both a political and economic tightrope.
US Q3 GDP is set for release on Thursday too, with the advance print set to show a marked decline back towards more normal levels just ahead of 3%. That’s down sharply from the 6.7% recorded in Q2 but aligns well with pre-pandemic levels. It’s also likely to be welcomed by policy doves who had been increasingly concerned about the pace of economic growth in the US, although any overshoot has the potential to raise concerns that the Fed will need to take a more aggressive line when it comes to policy tightening, bolstering the dollar and arguably giving stocks a bloody nose along the way.
The latest UK Consumer Borrowing data will round off the week. Growth in credit is expected to move to be around £750m, up from the £400m added a month ago and moving back towards pre-pandemic levels. This could be interpreted as consumers becoming a little more confident over the outlook, although again this is about establishing a trend as we move into the peak shopping season, rather than focusing on the figure in isolation. Strong growth here would bolster support for a BoE rate hike, propping up the Pound as a result.