Weekly Market Outlook: More inflation data and China GDP in focus USD: Manufacturing Data under the spotlight

peter.nguyen

Trader
Apr 6, 2022
65
1
9
29

USD: Manufacturing Data under the spotlight

In the US, this week will be dominated by the release of industrial production numbers, with growth expected to moderate only slightly from August to September. In addition, housing data will also be closely watched in order to gauge the effect of soaring mortgage rates on the housing market.

Weekly Market Outlook

In light of S&P Global PMI and ISM survey data due out for the US, industrial production data is expected to reveal the manufacturing output trend continuing to deteriorate. In addition to adding to the growing signals that economic growth in the United States and other parts of the world is slowing down, this weakening of demand will also contribute to lower inflationary pressures – in fact, factory input costs are down as a result of this weakening trend. These lower costs should, in turn, contribute to the reduction of inflationary pressures on consumer prices.

The PMI indicators in the last few months have been pointing in the direction of muted factory output performance, and the markets are predicting a 0.1% drop in industrial production in the months ahead.


CNY: Chinese GDP takes center stage

It will be a busy week for mainland China with several reports being released to assess the impact of the region’s zero-COVID policy and the associated restrictions. There has been some easing of restrictions over the third quarter, but the government has clearly maintained its strict approach.

Mainland China data are expected to capture the attention of markets, which will be looking at GDP data set to show better economic growth in the country. Experts forecast a 3.5% expansion in GDP for Q3 (YoY) after GDP expanded 0.4% (YoY) in Q2. It is more likely that retail sales and industrial production data will provide timely high-frequency data on the evolving situation and confirm that the economy is likely to remain on a positive path.

Despite recent improvements, concerns persist about whether China’s growth will remain subdued as COVID-19 is contained, and these concerns could dominate the PBoC policy meeting next week. Economists forecast just 3.3% GDP growth in 2022 and 4.5% growth in 2024.


GBP: Upcoming data releases assess recession risk

Given the growing chorus of concerns regarding the UK’s economic health and financial market stability, upcoming data releases will be eagerly analyzed for recession risks.

As a result of a botched ‘mini’ budget in late September – the most disruptive government-induced economic shock in recent history – sterling and gilts continued to fall, and the Bank of England intervened unprecedentedly in the bond market to help stave off a pension industry crisis. In the meantime, mortgage rates spiked as additional upward pressure was applied to already-elevated interest rate expectations. This has led many forecasters, including the International Monetary Fund, to downgrade the UK’s economic outlook while estimating higher and more persistent inflation than its peers.

Weekly Market Outlook

As the cost-of-living crisis continues to hit consumer spending, the September PMI showed the fastest decline in output since January 2021. It is expected that inflation numbers – due out Wednesday – will remain near 40-year highs, while retail sales numbers will likely decrease. UK consumer sentiment data will bring an end to the week, and they are also expected to remain sombre.


EUR: EU sentiment and Inflation data to watch

Recent consumer confidence figures for the EU and Germany are expected to remain subdued in light of persistently high inflation and growing economic gloom as sentiment is relatively weak across much of the global economy.

According to the official inflation figures, which are expected to be released on Wednesday, the rate of inflation rose by 10% in September, the highest rate seen in 70 years. As a result, economic sentiment is expected to remain in negative territory for the next few months.


CAD: CPI will be watched closely

As economic woes continue to emerge in the form of weak employment numbers and a recession warning from the International Monetary Fund, Canada’s data on inflation and retail sales will be highly anticipated this week.

There was a 2.5% drop in retail sales in July, which is not good news, but preliminary estimates suggest that sales will rebound by 0.4% in August. The inflation figures will also be kept an eye on for further signs of a slowdown in inflation.

Source: Weekly Market Outlook: More inflation data and China GDP in focus