(Before It's News)
The key economic releases this week include the personal income and spending report on Monday, ISM manufacturing on Tuesday, ISM non-manufacturing on Wednesday, and the employment report on Friday. The November FOMC statement will be released on Wednesday at 2PM. In addition, there are a few scheduled speaking engagements from Fed officials this week.
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This Friday’s nonfarm payroll report is the main risk event of the coming week. While consensus expected a print og 165K, some banks see space of upside surprises because of news reports suggesting stronger seasonal hiring, notably from Amazon.
There are also many Central Bank meetings but very little is expected. At the FOMC meeting we expect no action. We think the Fed’s objective is to signal that a hike is highly likely in December but that the path thereafter will be extraordinarily shallow. The market is pricing in a 70% chance of a December hike, which the Fed is likely to perceive as appropriate. There is no press conference or economic projections.
Likewise at the BoE meeting, little is expected in terms of policy change while the Quarterly Inflation Report (QIR) will likely be more cautious given higher prospective inflation. One thing many will be looking for is whether Mark Carney will announce an early departure or if he will stay on for an 8 year term. The BoE is expected to raise its headline ‘mean’ inflation forecasts to 1.5%, 2.7% and 2.6% for end-2016, 2017 and 2018 respectively and to forecast 2.4% for end-2019.
The RBA is also expected to remain on hold but some banks see a communication challenge for the Bank due to its preference for a lower currency, as such a slight dovish tone is forecast.
Finally, the BoJ is also expected to keep all policy settings on hold. The policy board looks poised to downgrade its inflation forecasts and delay the timing of 2% inflation further
Looking at the breakdown by week, it’s a busy start to the week for data today. We’ll be kicking off firstly in the UK where the latest money and credit aggregates data is due for September. Shortly after that we’ll get Q3 GDP for the Euro area along with the October CPI report. Over in the US this afternoon the big focus will be on the September personal income and spending reports, along with the PCE core and deflator readings. We’ll also get the Chicago PMI and Dallas Fed manufacturing survey.
Tuesday morning kicks off in China with the official manufacturing and non-manufacturing PMI’s for October. The RBA policy rate decision will also be due along with the BoJ decision. No change in policy for either is expected. In Europe tomorrow the only data due is the manufacturing PMI for the UK. There’s important data in the US however with the ISM manufacturing, while any last revisions to the manufacturing PMI will be made. The IBD/TIPP economic optimism reading will also be released, while vehicle sales data is out in the evening.
Wednesday morning kicks off with the remainder of the final manufacturing PMI’s in Europe, along with the latest unemployment rate print for Germany. Over in the US the highlight data wise is the ADP employment change reading which comes before the FOMC meeting later in the evening. As we noted earlier we’re not expecting any surprises at the outcome of that.
Turning to Thursday, the non-official services PMI will first of all be released in China. There’s not much data in Europe aside from the Euro area unemployment rate print however the focus will again be on another central bank meeting, this time in the form of the BoE. Again, we’re expecting no change to policy but the inflation report could be interesting. It’s set to be another busy afternoon in the US on Thursday. Q3 nonfarm productivity and unit labour costs kick things off followed by the remaining PMI’s. We’ll also get initial jobless claims, ISM non-manufacturing and finally factory orders.
There’s little sign of things quietening down on Friday. We’ll kick off firstly in Japan with the Nikkei PMI’s. In Europe we then get the remaining PMI’s for October along with Euro area PPI before all eyes turn to the October employment report in the US including of course nonfarm payrolls. We’ll also get the September trade balance reading.
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Finally, focusing only on the US, here is Goldman’s with its preview of the key events:
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Monday, October 31
- 08:30 AM Personal income, September (GS +0.5%, consensus +0.4%, last +0.2%); Personal spending, September (GS +0.4%, consensus +0.3%, last flat); PCE price index, September (GS +0.21%, consensus +0.20%, last +0.10%); Core PCE price index, September (GS +0.11%, consensus +0.10, last +0.20%); PCE price index (yoy), September (GS +1.2%, consensus +1.2%, last +1.0%); Core PCE price index (yoy), September (GS +1.7%, consensus +1.7%, last +1.7%): We expect personal income to rise by 0.5% and personal spending to rise by 0.4% in September. We also expect core PCE prices to increase by 0.11% in September after core CPI increased by 0.11% in September. The core PCE price index likely rose by 1.7% over the past year.
- 09:45 AM Chicago PMI, October (GS 54.0, consensus 54.0, last 54.2): We expect the Chicago PMI to edge down to 54.0 from 54.2. Details from the regional manufacturing surveys so far showed mixed signals in October, following mostly stronger reports from regional manufacturing surveys in September. We find that the flash Markit PMI does contain some predictive power for the ISM.
- 10:30 AM Dallas Fed manufacturing index, October (consensus 1.8, last -3.7)
Tuesday, November 1
- 09:45 AM Markit manufacturing PMI, October final (consensus 53.2, preliminary 53.2): Consensus expects the Markit services survey to be in line with its flash estimate. Most responses to the survey are received by the time of the preliminary release, and revisions in the final release tend to be fairly minor.
- 10:00 AM Construction spending, September (GS +0.3%, consensus +0.5%, last -0.7%): We expect construction spending to improve modestly in September, after a soft August report in which construction spending weakened by 0.7% and earlier months were revised down.
- 10:00 AM ISM manufacturing, October (GS 52.0, consensus 51.7, last 51.5): Regional manufacturing surveys so far have been mixed in October, and we expect ISM manufacturing to edge up to 52.0. The Philadelphia Fed survey (-3.1pt to +9.7) and the Empire State survey (-4.8pt to -6.8) both decreased, but the components improved more than the headline figures. The Kansas City Fed survey remained unchanged (+6), while most components looked more favorable. In contrast, the Richmond Fed survey increased moderately (+4pt to -5), but still remains in contractionary territory. On net, our manufacturing survey tracker—which is scaled to the ISM Index—increased a touch to 52.5 (vs. 52.2 in September).
- 04:00 PM Total vehicle sales, October (GS 17.8mn, consensus 17.5mn, last 17.7mn): Domestic vehicle sales, October (GS 14.0mn, consensus 13.7mn, last 13.9mn)
Wednesday, November 2
- 08:15 AM ADP employment report, October (GS +155k, consensus +165k, last +154k): We recently found that while the ADP employment report holds limited value for forecasting the BLS’s nonfarm payrolls report, large ADP payroll deviations from consensus forecasts are directionally correlated with NFP surprises. Based on our understanding of how ADP filters its own proprietary data with other publicly available information, we expect a 155k gain in ADP payroll employment in October.
- 02:00 PM FOMC statement, November 1-2 meeting: As noted in our FOMC preview, we think it is very unlikely (less than 5% chance) that the committee will raise rates at the November meeting. We see a 75% chance of an increase at the December meeting. The statement following the meeting is likely to remain relatively upbeat about US growth prospects following last week’s advance Q3 GDP report, which showed the economy grew at an annualized rate of 2.9%. The statement will likely again say that risks to the economic outlook are “roughly balanced”.
Thursday, November 3
- 08:30 AM Nonfarm productivity, Q3 preliminary (GS +1.7%, consensus +1.6%, last -0.6%): Unit labor costs (qoq), Q3 preliminary (GS +1.3%, consensus +1.5%, last +4.3%): We expect nonfarm productivity to increase at an annualized rate of 1.7% in Q3. We expect unit labor costs – compensation per hour divided by output per hour – for Q3 to increase 1.3%.
- 08:30 AM Initial jobless claims, week ended October 29 (GS 250k, consensus 256k, last 258k); Continuing jobless claims, week ended October 22 (last 2,039k): We expect initial jobless claims to decrease to 250k from 258k. Last week, claims declined slightly and were likely affected by filings related to Hurricane Matthew as well as unusually high claims in Kentucky. We expect to see further potential downside to filing activity accordingly.
- 09:45 AM Markit services PMI, October final (consensus 54.8, preliminary 54.8)
Friday, November 4
08:30 AM Nonfarm payroll employment, October (GS +185k, consensus +175k, last +156k); Private payroll employment, October (GS +175k, consensus +167k, last +167k); Average hourly earnings (mom), October (GS +0.3%, consensus +0.3%, last +0.2%); Average hourly earnings (yoy), October (GS +2.6%, consensus +2.6%, last +2.6%); Unemployment rate, October (GS 4.9%, consensus 4.9%, last 5.0%): We expect an October nonfarm payrolls gain of 185k, after a 156k increase in September. Our forecast partly reflects a continued decline in initial claims and a tendency for first-print October payrolls to be slightly stronger on average. The unemployment rate is likely to edge down one-tenth to 4.9%. We expect average hourly earnings to increase 0.3% month over month and rise 2.6% year over year.
- 08:30 AM Trade balance, September (GS -$38.4bn, consensus -$40.7bn, last -$40.7bn): We expect the trade balance to narrow further in September. The Census Bureau’s new Advance Economic Indicators report showed a smaller trade deficit and moderate inventory accumulation in retail and wholesale sectors. Overall, we expect the total trade deficit to decline to -$38.4bn.
- 08:45 AM Atlanta Fed President Lockhart (FOMC non-voter) speaks: Atlanta Fed President Dennis Lockhart will give a speech on the U.S. economy at the National Association of Realtors’ Conference and Expo. Q&A is expected. Recently, President Lockhart remarked that he agreed with the FOMC’s decision to keep rates on hold at the September FOMC meeting, but suggested that he would be “comfortable” raising rates in the near future if upcoming data supported it.
- 04:00 PM Fed Vice Chairman Fischer (FOMC voter) speaks: Federal Reserve Vice Chairman Stanley Fischer will participate in a panel focused on “Policy Challenges after the Great Recession” at the International Monetary Fund’s annual research conference on “Macroeconomics after the Great Recession”. Recently, Vice Chair Fischer said there are heightened risks of financial instability if interest rates are kept low for too long. He also expressed his reluctance to raise the inflation target.
Source: DB, BofA, GS