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ECONOMIC DATA ANALYSIS - US FISCAL COMPROMISE SHIFTS SPOTLIGHT BACK ON THE DATA
ANALYSIS FRIDAY 18 - 24 OCT 2013
FISCAL COMPROMISE SHIFTS SPOTLIGHT BACK ON THE DATA
Backlog of US data starts to unwind in the coming week; September payrolls on
• UK Q3
GDP to post strong growth - we look for +0.8%q/q, with risks to the upside
on growth, competitiveness and banking union at EU leaders Summit
US fiscal ceasefire boosts
sentiment... The last minute compromise reached by Congress has averted the
risk of a US fiscal impasse turning into a global financial crisis - at least
for now. Although only a temporary agreement, global financial markets have
responded with a collective sigh of relief. Amid an improvement in risk
appetite, the US dollar has generally weakened and equity prices have risen,
with the S&P hitting a record high. Despite the improvement in risk
sentiment, US bond yields have continued to drop on speculation that the
ramifications of the fiscal dispute may delay Fed ‘tapering’ into next year.
to turn back to the data... After all the US political shenanigans,
market attention looks set to turn back to the economic data. The end of the US
government shutdown paves the way for a raft of postponed economic reports to be
released over the coming weeks. The BLS has published a revised schedule for
some of its September and October releases following the recent disruption. The
September employment report, which was initially due on 4 October, will now be
published on Tuesday, although the October release has been pushed back a week
to 8th November.
September payrolls to rise by 189k... Overall, we expect nonfarm
payrolls to have posted a gain of 189k in September - slightly above the 180k
market consensus. Our forecast is largely driven by the decline in jobless
claims over much of last month and the recent rise in the employment components
of the manufacturing and non-manufacturing ISMs. Market reaction to the
September payroll report is likely to be tempered by recent events and
the possibility of a much weaker payroll next month as a direct result of the
government shutdown. September new home sales and durable goods orders data
should also be released in the coming week.
markets boosted by US... US developments have been the key
driver of UK markets over the past week, although domestic sentiment has also
been impacted by continued signs of recovery. The latest retail sales and
claimant count figures posted strong improvements in September, with the latter
recording its sharpest monthly decline in 16 years. In the currency markets,
GBP/USD has risen back towards 1.62, while the FTSE has rebounded above 6,500.
The UK gilt curve, meanwhile, has continued to flatten, with 10-yr yields
dropping 3bp on the week, to 2.7%.
Q3 GDP in the spotlight... Attention in the UK will be mainly
focused on the preliminary Q3 GDP outturn (Fri). We expect GDP to have posted
another strong increase, driven by broad-based improvements in manufacturing
and services output. Overall, we look for a rise of 0.8%q/q, although the
strength of the recent PMIs, retail sales and employment data suggest the risks
are skewed towards an even firmer reading.
comments also watched... The minutes of the October MPC meeting are
also due (Weds), while Mark Carney and Charlie Bean are both due to give
speeches. These will be closely scrutinised for any sign that the MPC’s
views on policy are shifting amid growing signs of recovery. The MPC minutes
are expected to show that the decision to keep policy unchanged earlier this
month was unanimous, although we suspect the tone of the debate may put
further upward pressure on yields.
leader’s Summit... EU leaders are due to meet in the coming
week amid welcome signs of improvement across the region. Key topics for
discussion will be the digital economy, measures to boost growth and
competitiveness and progress towards a banking union. Data wise, the focus will
be on the October German IFO and the euro area ‘flash’ manufacturing and
services PMIs. Further modest improvements in all three are expected.
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