We're expecting a flurry of 3Q GDP reports from the EMEA region next week and expectations are mixed. Figures from Poland will likely be better-than-expected and the Czech Republic should see a small acceleration. But the slowdown story in Hungary is set to persist, while Romania and Bulgaria could decelerate, too
For the third quarter, we expect Polish GDP to come in at 4.9% year-on-year- above consensus- supported by strong domestic demand. Investment should recover after a soft second-quarter, partially offsetting a moderation in private consumption.
The final CPI inflation reading should confirm a slowdown to 1.7% YoY in October. According to the flash reading, the slowdown was largely caused by food prices. But still, core inflation is likely to remain stable at 0.8% YoY.
An exciting week ahead in developed markets. We hope to better understand the Eurozone's recent poor performance, and see a political stalemate in Sweden come to a showdown. And if your feeling particularly blue after the midterms, we expect a healthy run of US domestic data
With the mid-term elections now behind us, focus switches back to what looks set to be another solid week for US data. Core inflation should remain above the Fed’s 2% target, and we expect it to stay like that as firms look to pass on the higher wage costs they are increasingly faced with. These positive fundamentals, combined to some extent with the additional tailwind of earlier tax cuts, should make for another decent set of retail sales figures next week. Taken together, this should all keep the Fed firmly on track to hike rates in December and three further times in 2019.
Recent currency gains have taken the pressure off Asian central banks to tighten, while growth has started to taper off and inflation remains subdued in most of the region. A softer dollar in the aftermath of the US midterm elections combined with sliding oil prices suggest that hard-hit Asian currencies INR, IDR, and PHP will outperform
Bank Indonesia, Bangko Central ng Pilipinas, and the Bank of Thailand hold their monetary policy meetings next week. We expect all three to leave policy unchanged.
A moderation in GDP growth and subdued inflation (aside from the Philippines) is partially responsible for this. But more importantly, an ongoing consolidation in their respective currencies after significant losses earlier in the year is a big solace for BI and BSP, Asia's busiest central banks, in their drive to rein in currency weakness.
The Philippine peso (PHP) was the region's best performer in October and continues to add to those gains in November with a 1.8% month-to-date (MTD) appreciation against the US dollar. This month, the best performing currency is the Indonesian rupiah (IDR), with a 4.4% of gain so far, recovering more than a third of the cumulative loss in the first 10 months of the year. The Thai baht (THB), which, in a sudden reversal of fortune, was Asia’s worst currency in October, has also joined in the rally this month. Lower oil prices are also helping to keep policy unchanged and, absent some adverse shock on the horizon, Asia’s hitherto hard-hit currencies are set to perform well.
This week, Indonesia and the Philippines reported steady GDP growth for the third quarter, at 5.2% and 6.1%, respectively. However, a softening of household spending- the key GDP driver in both countries- was alarming, particularly in the Philippines where inflation of 6.7% in October has already been hurting consumers. Until the Philippines GDP release, our house view had been for a 25 basis point BSP rate hike at the meeting next week. That's now been revised to no change, probably through the rest of the year (read more here). The same looks to be the case for BI policy, as a strong performance for the Indonesian rupiah and stable inflation around 3% allow for stable policy, for now.
Shifting between talk of continued accommodation and tightening (or normalisation), the BoT policymakers have missed the boat this year. Recent economic data undermines the government’s optimism on GDP growth this year – we have cut our 3Q forecast to 3.7% from 4.1% (read more here). This dampens the prospects for policy normalisation; it’s hard to call it tightening, which isn’t required just yet with continued low inflation and prevailing growth risks.
Discover what ING analysts are looking for next week in our global economic calendars