In the euro area, focus will be on the extraordinary Eurogroup meeting at the beginning of the week, and on the G-20 at the end of the week. The calendar of macro events includes the release of the initial estimate of 3Q GDP growth (in Spain), completion of the round of October confidence indices, and a set of indications on price and labour market trends…….
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Busy calendar of data releases this week in the United States. September data should provide positive indications for consumption and residential real estate. As regards October, the ISM and Chicago PMI should confirm a modest activity growth in the manufacturing sector; auto sales should be up further. The October employment report is expected to show nonfarm payrolls’ growth in line with the recent trend (around 110k non-farm payrolls), and a one-tenth rise in the unemployment rate, to 7.9%.
In Japan, the BoJ meeting should significantly step up monetary stimulus.
Monday 29 October
Euro area
Eurogroup. The Euro Working Group (EWG) is scheduled to end, during which the Greek government presented its austerity budget for the 2013-2014 two-year period, agreed upon with the Troika. The EWG will have to assess the feasibility of the fiscal plan, and its approval will be crucial in enabling the Eurogroup meeting on 12 November to unblock the 31 billion euro tranche of the bailout package, on hold since June. Also, the EWG could define the financing modalities of a potential postponement of fiscal objectives (the Greek government is asking for achievement of the 4.4 billion euro deficit target to be pushed back to 2016, from 2014), and find ways to guarantee the sustainability of public debt. Lastly, the EWG could impose closer monitoring of Greece’s fiscal performance and reform process, and call for stricter operating conditions with regards to the deposit account with the Bank of Greece guaranteeing repayment of public debt.
Germany. October inflation is expected to drop to 1.8% from 2% in September, with the price index contracting by 0.1% on a monthly basis. Harmonised inflation should also level off at 1.8%, with the index on the decline by 0.2% m/m. Price growth moderation is largely ascribable to lower oil prices. Inflation should drop by another few tenths between now and the end of the year, and moderate further in the opening months of 2013.
United States
Personal spending is estimated to have increased in September by 0.6% m/m. Overall consumption should be solid, in light of strong retail sales data (both including the auto sector and ex-auto). Personal income should be up by 0.3% m/m; a rather strong increase in labour income should be balanced by lower interest income and by the negative effects of the expiration of emergency unemployment benefits. The savings rate should decrease further, from 3.7% in August to 3.5% in September. The consumption deflator is expected to rise by 0.3% m/m, and the core index by 0.1% m/m, keeping the year-on-year rate at 1.6%.
Tuesday 30 October
Euro area
Spain. Inflation is expected to increase in October to 3.6%, resulting in a +1% change in month-on-month terms, as was the case in September; harmonised inflation would be up to 3.7%, with the index on the rise by 0.7% m/m. Although a good portion of the VAT hike has already been reflected by prices, inflation will continue to accelerate until the end of the year, also as a result of a statistical effect.
Spain. Third quarter GDP growth could be negative by 0.4%, as anticipated by the Bank of Spain in its October bulletin. Therefore, the reading would not show a worsening of the recession compared to the previous three months, essentially as a result of spending decisions being brought forward to the summer, ahead of the VAT hike as of September. Our forecasts for 2012 as a whole point to contraction of around 1.4%: the recession will deepen in 2013, when GDP is forecast to contract by 1.6%.
Germany. The unemployment rate could rise to 6.9% in September, after staying at 6.8% (its lowest level since the series began over 20 years ago) for 10 months. The number of unemployed could rise by 15k, accelerating slightly compared to the past three months.
The European Commission’s composite index for the euro area as a whole should drop to 84 in October, from 85 the previous month. Consumer confidence should confirm the preliminary reading of -25.6, up only marginally from -25.9 in September, in any case staying at levels compatible with a contraction in household spending. Business confidence is expected to deteriorate both in manufacturing (to -17.5 from -16.1) and, to a lesser degree, in services (to -12.5 from -12).
United States
Consumer confidence as surveyed by the Conference Board in October should rise to 76 from 70.3 in September, in line with the recent uptrend expressed by all the indicators of household confidence. According to the University of Michigan survey, confidence improved by almost 5 points, with a marked brightening of the forward-looking component. Unlike businesses, households do not seem to be greatly affected by concerns ahead of the fiscal cliff: the prevailing forces are currently the positive influence on confidence of the consolidating uptrend in home prices, and the confirmed turnaround of the residential real estate sector. After the elections, focus will shift back on the restrictive measures planned for 2013, and the recent uptrend could be interrupted.
Japan
The BoJ meeting should significantly step up the monetary stimulus already in place. The meeting coincides with the publication of half-yearly economic forecasts, which should confirm projected inflation consistently below the 1% target in 2013, in addition to a sharp slowdown in growth compared to 2012. We expect the central bank to announce a significant expansion of its securities purchase programme. The BoJ may announce an openended purchase programme, in Fed-style, raising the monthly purchases currently called for by the existing programme. It the BoJ is not ready for such a decisive change in gear, it could in any case opt for a 15-20 tln yen extension of the purchase programme, including a limited share of risk assets (ETF, REITs) and concentrating most of the expansion on JGBs, possibly also on longer maturities than those covered hitherto (2-3 years). Some forecasters include among the possible expansion of the program the purchase of foreign currency securities. The yen is already reflecting expectations for new stimulus, and is back close to 80 against the dollar for the first time since June.
Wednesday 31 October
Euro area
France. Consumer spending is expected to have contracted slightly in September. Retail sales could be down by 0.1%, vs. -0.8 in August, translating into a -0.5% y/y drop; in the quarter, consumption would therefore record another positive change, albeit limited to 0.1%. Retail sales are not expected to receive any support from the automotive sector, as car registration growth was virtually zero in September; on the other hand, a boost may come from a rebound in clothing and apparel sales after the summer contraction. The consumption trend is expected to weaken in the closing weeks of the year, due to deteriorating consumer sentiment tied to difficult labour market conditions and expectations for fiscal tightening.
Italy. The unemployment rate could be back on the rise in September, to 10.8% in our estimation, after staying put at 10.7% in the previous three months. The previous month’s stabilisation was due to an increase in inactive workers, despite a drop in the number of the employed. In our view, unemployment could continue to rise at least for the next six months.
The flash estimate of inflation in the euro area should moderate to 2.3%, from 2.6% in September, translating into a +0.1% month-on-month rise of the consumer price index. Moderating energy prices should help cool inflation, which could drop below 2% in the opening months of 2013.
The unemployment rate in the euro area could be up by one-tenth in September, to 11.5%, hitting a new historical high. The further deterioration of the labour market in peripheral countries is not being balanced, at present, by an opposite trend in core countries.
Italy. In October inflation should drop slow to 2.8% from 3.2% in September, with the price index rising by 0.2% month-on-month. Harmonised inflation should be down to 3% from 3,4% the previous month, placing the index at +0.5% m/m (vs. +2.1% in September). In Italy as well, price moderation is the result of easing pressures from the energy component, albeit balanced in the month by higher tariffs (electricity +1.4%, gas +1.1%).
United States
The ADP estimate of non-farm payrolls in the private sector is forecast by consensus at 135k, lower than the September ADP figure (162k).
In October the Chicago PMI should climb back to 52 after sliding to 49.7 in September. The survey breakdown was rather negative in September, with orders dropping below 50 (to 47.4, a low since September 2009), and employment and output on the decline, albeit above 50. Activity in the auto sector should accelerate back in October, and auto sales are expected to stay solid throughout the autumn.
Thursday 1 November
United States
Productivity in 3Q is estimated to have increased by +1.2% q/q, down from +2.2% q/q in 2Q 2012.
The manufacturing ISM should come in broadly unchanged in October, at 51.2, from 51.5 in September. Regional survey data were mixed in October; the September ISM survey, while showing an improvement, still placed orders and output below the 50-point threshold; data on the manufacturing sector point to a stabilisation of activity, with no sign of a significant reacceleration.
Construction spending in September should be up by 0.7% m/m, after dropping by -0.6% m/m in August. Housing starts were particularly strong in September, on the rise by 15% m/m, although completed units grew at a much slower pace. Spending in residential construction is expected to have increased, as opposed to a stabilisation of spending in the commercial construction segment and an ongoing decline in the public sector. Spending on residential investments will contribute positively to growth throughout 2012.
Motor vehicle sales in October are estimated to have increased by a further 15 million ann. from 14.88 in September, with auto sales to companies also making a strong contribution.
Friday 2 November
Euro area
The October manufacturing PMI in the euro area should confirm the preliminary reading of 45.3, down from 46.1 in September. The forward-looking cycle indicator has dropped to extremely low levels, compatible with a contraction in GDP at the end of the year as well.
United States
The October employment report should confirm the moderate pace of growth in employment recorded over the past six months, marking a 110k increase in non-farm payrolls, in line with the September reading (114k). New jobless claims were very volatile in the month, but in the survey week they were only marginally higher than in the corresponding week of September. Employment in the public sector is expected to decrease, after rising in August and September, at both the state and federal levels; at the state level, data were mostly impacted by the education sector, where teacher cuts were lower than in the 2008-2011 period, resulting in difficulties in the seasonal adjustment process. Employment in the private sector should be up by 135k (approximately in line circa with the 2012 average of 145k). The unemployment rate should climb back by one-tenth to 7.9%, after dropping sharply in September (from 8.1% to 7.8%), with the participation rate on the rise to 63.7% and, more importantly, a decrease in employment recorded by the household survey. In September, this survey, typically more volatile than the business survey, recorded an employment boom (+873k), after averaging +173k between June 2011 and August 2012, and 151k since the beginning of the 2010. Hourly wages should be up by 0.2% m/m, in line with the average.
Appendix
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