Trade balances and sentiment indicators take centre stage in EMEA and Latam next week and will be closely scrutinised following the recent volatility in emerging markets. We're also looking out for Polish budget data, which should show that July's huge deficit was an anomaly
The budget data should provide evidence that the enormous deficit in July was a one-off. We expect the August figure to present a more typical seasonal pattern of both expenses and revenues. According to the Ministry of Labour estimate, the unemployment rate should fall further to 5.8%, below the initial market consensus (5.9%).
Asian central banks in Indonesia and the Philippines look poised to follow the US Fed in raising interest rates again to support their currencies, as new US tariffs on $200 billion of Chinese goods, and talks of more to come, cast a shadow over markets
The week kicks off with the next round of US tariffs on $200 billion of Chinese products on Monday (24 September). China’s retaliatory tariffs on US products take effect at the same time, possibly setting in motion the next phase of US tariffs on $267 billion of imports from China.
As markets have long been pricing in the intensification of the US-China trade conflict, deliberations continue about the gravity of consequences on respective economies and the rest of the world. While we will hear more about this from the US Fed (the third rate hike this year to come with the Fed’s revised economic outlook), China's Purchasing Managers Index (PMI) for September may provide a glimpse of the impact on that economy. We anticipate both manufacturing and services PMIs to have ticked down from their levels in August, with new export orders and employment persisting as drags on the manufacturing side.
Swedish politics, Bank of England speakers and a Fed meeting - which should conclude in a 25bp rate hike - are among next week's highlights for developed markets
The US highlight will be the Federal Reserve meeting, which looks set to conclude with a 25 basis point interest rate rise. The economy is booming - The Atlanta Fed's Nowcast model suggests 3Q GDP growth is set to accelerate to 4.4% annualised growth - and inflation is at or above the Fed's 2% target on all of the main measures. At the same time, the jobs market is incredibly strong, with growing signs that wages are picking up and asset markets are buoyant. This suggests to us that the Fed will stick with its policy guideline of "gradual" interest rate increases.
While there is nervousness about the intensification of global trade tensions and the imposition of additional tariffs, the economy is showing little sign of slowing. As such, a December rate rise remains on the cards, but we do expect a slower pace of tightening next year. The fading fiscal stimulus, trade tensions, a strong dollar, rising interest rates and concerns about emerging markets will increasingly exert headwinds that will slow growth. We look for the Fed to follow up 2018's four 25bp rate rises with only two further moves in 2019.
In terms of US data, 2Q GDP could be revised marginally higher from the 4.2% rate originally reported, while consumer confidence and housing numbers should be underpinned by the strong jobs market and tax cuts. Durable goods orders should rebound thanks to strong Boeing aircraft orders in August.
Discover what ING analysts are looking for next week in our global economic calendars