- Bank of England consumer borrowing data could show weakness in UK economic recovery
- Chinese PMI Manufacturing data has potential to show early signs of supply chain bottlenecks easing
- Eurozone inflation set to rise further
The week starts with Durable Goods Order data from the US for August. Supply chain issues mean opinions are divided as to whether this number can return to positive territory after the -0.1% we saw posted in July. The concern here is likely to be that any production slow-downs risk adding fuel to the inflationary fires that are already burning, in turn asking fresh questions over whether the Fed is doing enough when it comes to managing the risk.
Tuesday morning sees attention shift to Germany when the Gfk Consumer Confidence reading for October will be published. The figure managed to trend higher through the first half of the year, albeit remaining in negative territory for the duration, although confidence appears to be waning once again, with inflationary pressures and sluggish job creation both weighing. Anything below the September reading of -1.2 poses the same conundrum for the ECB in terms of trying to tighten monetary policy in a phase of weaker consumer demand.
On Wednesday, the Bank of England consumer credit data will be published for August. The COVID pandemic saw people paying down debt and spending less, driving this figure – which historically has been positive – into negative territory. Although total debt has been increasing again over the second quarter, it seems as if this has stalled. There’s a combination of factors in play here including rising wages, consumer uncertainty as to what comes next and the fact that the initial post-lockdown economic rebound is fading. Consumer spending stands to play a key role in sustaining the economic recovery, something that the Bank of England will be mindful of, as higher interest rates will risk stubbing out economic growth.
Also on Wednesday, the Bank of England Mortgage Lending print for August is due. This number drifted lower last month after being impacted by the changes in stamp duty, although was still above market expectations and a return to net growth is being forecast. The quantum of this arguably isn’t too important, but the fact that it’s moving higher again suggests that Rishi Sunak’s intervention won’t cause lasting damage to the market.
On Thursday, the private Caixin Manufacturing PMI reading for September is out. This will offer some valuable insight as to how China is faring in the face of supply chain constraints and expectations are that the break-even mark of 50 will be achieved. That would reverse the trend lower that has been observed over the last three months and if production is picking up, this could in turn be seen as offering some respite to inflationary pressures globally.
Although it’s the first Friday of the month, the calculation schedule means that the US non-farm payrolls will have to wait another week. The Eurozone Inflation Flash for September will however be closely followed, with expectations that there will be further increases on last month’s 3% print. Whilst that in itself will be a concern for policymakers, as noted if we start to see some evidence of the global supply chain bottlenecks easing then this allows the ECB to maintain that lax stance over rates.