A central bank meeting in Hungary, economic activity data from Russia and confidence indicators from Poland are this week's highlights in EMEA
In Hungary, the earlier-than-usual Monetary Policy Committee (MPC) meeting- due to a national holiday on 23 October- will likely be a non-event given (1) the National Bank of Hungary (NBH) made a lot of adjustments just three weeks ago; (2) one of them was that the NBH will do major adjustments only quarterly when it releases its new Inflation Report; and (3) the September inflation readings didn’t provide any major surprise as core inflation was at 2.4% year-on-year.
Two questions arise in developed markets next week: Will some form of a Brexit deal be proposed in time for the European Council meeting, and will Italy be softening its budget stance? We also expect US economic momentum to carry on, with upside risks to two key domestic data releases
After a disappointing August for retailers, caused by clothing discounting and a decline in restaurant sales (which make up 10% of all retail spending), sales should bounce back strongly in September. Vehicle sales jumped to an annualised 17.4 million rate from 16.6 million, while a strong jobs market and robust consumer confidence also suggest that the weak August reading was likely just a blip. Admittedly there is the potential for some disruption due to Hurricane Florence, but on balance we see upside risks to the 0.7% month-on-month consensus expectation.
Likewise, there is the risk for some data volatility within the industrial production report, but again we see some upside to the market forecast of a 0.2% MoM gain. Business surveys remain at incredibly strong levels, and with manufacturing employment having risen 18,000 on the month, we look for a very respectable 0.3% MoM increase. The post-Florence clean-up and rebuilding efforts are going to support activity in the affected region, and this should contribute to healthy activity readings for October, too.
China’s 3Q GDP and the Korean central bank policy meeting are the key highlights of next week. While growth slowdown in China is pretty much priced in by the markets, the Bank of Korea’s policy decision looks like it'll be a close-to-call event
China is due to publish its first GDP report since the trade war kicked off in early July, and we think it is likely to show only a negligible impact. However, it is entirely possible that third-quarter data might not even capture the full impact of the trade war.
This is because the first formal salvo of the $34bn of US tariffs hit on 6 July, followed by $16bn on 23 August and a further escalation to an additional $200bn a month later. Moreover, exports were little affected with still high single-digit year-on-year growth. This is what, we think, underpins the consensus view of 6.6%, a meagre drop from the 6.7% in the previous quarter. Our forecast is 6.5%.
Among the remaining economic indicators due in September, consensus expectations indicate a slight slowdown in exports and industrial production growth, steady retail sales growth, and a pick-up in fixed asset investment growth - all consistent with the forecast of a slight dip in GDP growth.
Beijing is trying to offset potential export weakness (as a result of higher tariffs) by boosting domestic infrastructure spending and dialing back on deleveraging and manufacturing sector reforms. With macro policy geared towards a soft-landing, our house view remains that the economy continuing to eke out GDP growth at an excess of 6% during the tariffs era.
Discover what ING analysts are looking for next week in our global economic calendars