We hold to our views, anticipate confirmation

Genevieve Signoret

Macro Views

We hold to our views and expect confirmation next week from BoE, Germany, and China.


We look for confirmation of our central scenario views next week through dovish Bank of England minutes, an improved factory survey (PMI) in Germany, but a rash of poor data from China.

Bank of England will sound dovish

We expect Bank minutes to be dovish. This would lower the risk to our positive outlook for the U.S. economy and a Fed rate hike in 2015.

Germany’s manufacturing PMI will be stronger

Based on hopeful reports from the German auto industry, we also expect an improved German PMI.

China data will be weak

We expect a rash of poor China data on Tuesday. This would confirm the assumption we used to build our 2014–2015 global outlook that Chinese GDP growth rates won’t exceed 7.3% this year or next.

Our views remain unchanged but downside risks have heightened

We hold to our central scenario view that the U.S. economy is on track to accelerate next year and that the Fed will raise interest rates some time in the second half. But we perceive risks to that view to have risen, as, more and more, U.S. domestic demand alone bears the burden of keeping the whole global economy growing.

U.S. domestic demand alone looks robust and Mexico is benefitting

From our broad reviews published this week of trade, labor markets and industrial production around the world published last week, and from our examination of money and credit trends in the USA, the euro area, and Mexico, we conclude that U.S. domestic demand remains solid but it’s just about the only force boosting global activity today.

This is one of those moments when we stop ruing and instead rather enjoy the fact that Mexico’s economy is so strongly dependent on the USA’s.

Next week in detail

Events in red are those most likely to shake markets.

Monday 20

  • Japan: Bank of Japan speech: Kuroda. Bank of Japan holds its quarterly meeting of its regional branch managers. Governor Kuroda will deliver a short speech at the outset of the meeting, which will also produce a quarterly report on regional sectors of the economy.
  • USA: Fed speech: Powell. At the Federal Reserve Bank of St. Louis Webinar and Conference Call: Fed Perspectives on Community Banking.
  • Mexico: Deadline for House to pass 2015 revenue bill in Mexico.

Tuesday 21

  • China: Retail sales (Sep), industrial production (Sep), GDP (Q3), fixed investment (Sep). China August data showed a slowdown, with industrial production decelerating to a Great-Recession–like pace. We expect poor data. This would confirm the assumption used to build our 2014–2015 global outlook that GDP growth rates in China won’t exceed 7.3% this year or next. Consensus: retail sales, 11.7% a/a (from 11.9% in Aug); industrial production, 7.5% (from 6.9% in Aug); GDP, 7.2% (from 7.5% in Q2).
  • Mexico: Banamex survey (H1 Oct).

Wednesday 22

  • Japan: Foreign trade (Sep).
  • UK: Monetary policy meeting minutes (Oct 9). At its October 9 meeting, the Monetary Policy Committee decided to leave its asset purchase program unchanged at £375 billion and its rate at 0.50%. New labor data point to a faster-than-expected recovery. However, inflation is low, industrial production has been slowing down, and trade flows are falling. Also, and perhaps as a consequence, the central bank’s chief economist said in a speech today that he would now prefer that the central bank postpone raising rates to some date farther out than the first quarter of 2015. We expect the minutes to be dovish. If we’re right, the British pound is likely to weaken even further than it did today and global stock markets will likely receive a boost.
  • USA: Consumer prices (Sep).
  • Mexico: Retail sales (Aug).

Thursday 23

  • Global: Markit manufacturing PMI (Oct, flash). We’re most concerned about Germany. The largest risk in the global economy today is that the euro area falls into a deflationary spiral. Germany has been that economy’s motor, but now industrial production there is trending way down, and German imports are flat. On the positive side, Germany exports do continue to trend up.
  • Euro Area: Meeting of European Union heads of state or government.
  • Turkey: Monetary policy decision.
  • USA: Unemployment claims (Oct 18), FHFA house prices (Aug).
  • Brazil: Unemployment rate (Sep).
  • Mexico: Consumer prices (H1 Oct).

Friday 24

  • Korea: GDP (Q3, preliminary).
  • UK: GDP (Q3, preliminary). Consensus: 3.0% a/a (from 3.2% in Q2).
  • Mexico: Global economic activity indicator (Aug). Mexican economy looks on its way to recovery. Consensus: 2.04% a/a (from 2.52% in Jul).
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