Economic Snapshot for the Week Ahead: Week of September 19, 2022

The following is an excerpt from S&P Global Market Intelligence’s latest Week Ahead Economic Preview. For the full report, please click on the “Download full report” link.

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Three of the five largest economies will hold their central bank meetings this week, including the United States, Japan and the United Kingdom. Much attention is focused on the Fed after last week’s higher than expected inflation reading. Other planned central bank meetings include the Philippines, Indonesia, Hong Kong SAR, Switzerland, Brazil and Taiwan. The week will end with flash PMIs for the UK, US, Japan, Eurozone and Australia, which will provide a key indication of economic performance at the end of the third quarter.

US FOMC meeting returns as falling energy costs failed to offset soaring prices in other categories, meaning inflation held higher than expected at 8 .3%. Going forward, the Fed’s aggressive stance is likely to continue, with markets pricing in a third consecutive 75 basis point hike, although a 100 basis point hike is also on the table. Interest rates are expected to reach 4.25% by the end of 2022.

After being postponed due to the death of Her Majesty Queen Elizabeth II, the Bank of England meeting will take place for which markets will be eager to see the assessed impact of the energy price cap on projections for banking inflation. That said, the cap is unlikely to impact the bank’s immediate policy decision, for which markets are pricing in a 50 basis point hike. Unlike in the US, UK inflation figures came in below expectations due to falling fuel costs, leading to the first decline in the CPI on an annual basis for almost a year. However, inflation in the UK remains close to its highest level in 40 years, with rising food prices being a particular concern.

Flash PMIs will be eagerly awaited amid growing recession concerns. The latest IMI data released last week signaled that almost 80% of US investors fear a recession. The Flash PMIs will not only provide updates on demand, supply conditions and growth, but will also give an update on the inflation front. PMI price indices have retreated across the board in recent months amid easing supply delays and cooling demand, although they remain high by historical standards. Also keep an eye out for updated consumer confidence figures in Europe.

Finally, inflation figures from Japan will accompany the BoJ’s policy decision, while retail sales and inflation data from Canada will also be released.

Corporate earnings are under pressure amid economic slowdown and sustained inflation

The coming week will see updated flash PMI data for major developed economies, and as usual the focus will be on macro signals from the surveys in terms of GDP, output, employment and GDP. inflation. However, surveys can also provide powerful tools for understanding corporate earnings dynamics. By capturing changes in key business metrics such as sales, demand, pricing power, margins, and productivity, PMI surveys can provide very timely signals about underlying earnings and earnings trends, such as illustrated in the graph below for the United States.

This chart plots a simple composite earnings indicator taken from S&P Global’s PMI data for the United States against earnings per share growth momentum. The indicator, updated in this chart through August, currently points to the strongest downward pressure on earnings since the global financial crisis, excluding the first few months of pandemic lockdown. This reflects falling demand for goods and services, squeezed margins due to falling demand, falling productivity and a large reduction in pricing power, with supply outpacing demand for a large variety of products and services.

The advantage of the PMI is that earnings indicators such as those mentioned above can be compiled for each country and major market sectors, which makes the upcoming PMI data for September all the more important to watch. Find out more in our special report.

Calendar key events

monday september 19

Japanese Market Holiday / UK Market Holiday

Hong Kong SAR Unemployment Rate (August)

Construction output in the euro area (July)

NAHB US Housing Market Index (Sep)

tuesday september 20

Inflation in Japan (August)

Australian RBA Meeting Minutes

Swiss trade balance (August)

Job growth in Poland (August)

Spain’s trade balance (Jul.)

Inflation rate in Canada (August)

Building permits in the United States (August)

Wednesday, September 21

Australia Westpac Leading Index (August)

Consumer Confidence in the Netherlands (Sept.)

UK public sector net borrowing (August)

Eurozone ECB non-monetary policy meeting

FOMC Decision on US Fed Interest Rates, MBA Mortgage Applications (16/Sep), Existing Home Sales (Aug)

Decision on interest rates in Brazil

New Zealand Trade Balance (August)

Thursday September 22

Japanese BoJ Interest Rate Decision, Foreign Bond Investment (Sep)

BoE interest rate decision in the UK

Hong Kong SAR Interest Rate Decision, Inflation (August)

Business confidence in France (Sept.)

Eurozone ECB General Council meeting

Switzerland SNB decision on interest rates

Decision on interest rates in Taiwan

Philippines Interest Rate Ruling

Norway Norges Bank Interest Rate Inflation Decision

Decision on interest rates in Indonesia

Thailand’s trade balance

Canadian New Housing Price Index (August)

Continuing U.S. Unemployment Insurance Claims (10/Sep)

Flash on consumer confidence in the euro zone (Sept.)

friday september 23

Japanese Market Vacation

S&P Global Flash Global PMIs*

UK Gfk Consumer Confidence (Sep)

Netherlands GDP (Q2)

Singapore Inflation (August), Industrial Production (August)

GDP of Spain (Q2)

Swiss current account (T2)

Unemployment rate in Poland (August)

Retail sales in Canada (July)

* Index press releases produced by S&P Global and relevant sponsors are available here.

What to watch

Americas: FOMC meeting in the United States, PMI indices, housing data, unemployment insurance claims, as well as retail sales and inflation in Canada

The FOMC meeting is the highlight of the week, with the Fed set to announce another big hike. Markets are pricing in another 75 basis point addition to the fed funds rate. Expectations on the pace of further increases could, however, be affected by the flash PMI indices, which indicated a marked slowdown in activity in August. Also watch housing market data, including the NAHB index, which has weakened in recent months, and building permits data – where forecasts point to a third monthly contraction.

In Canada, retail sales and inflation will provide an update on the impact of recent aggressive rate hikes by the Bank of Canada. Retail sales growth eased last month, while lower gasoline prices eased some price pressure.

The Central Bank of Brazil is also expected to implement another hike. The selic rate is currently 13.75%.

Europe: UK and Eurozone PMI and Consumer Sentiment, Spain and Netherlands Q2 GDP

The final second-quarter GDP readings for Spain and the Netherlands will be revealed on Friday, but it’s September’s more up-to-date flash PMIs for the UK and the euro zone that will attract the most interest, as well than data on consumer confidence. The latter is likely to indicate weak consumer sentiment amid the current cost of living crisis. From a policy perspective, the Bank of England will inevitably hike aggressively again, but the rhetoric will be closely watched amid growing signs, including the PMI, of a potential recession.

Asia-Pacific: BoJ meeting, inflation data from Japan and Singapore, plus Hong Kong SAR policy rate

Inflation figures in Japan and Singapore are likely to remain elevated. A central bank policy decision in Japan accompanies the inflation update, and the BoJ is expected to keep interest rates ultra-low despite inflation exceeding the target rate by 2% (2.6% in August). Meanwhile, in Singapore, inflation is expected to be above trend between 5% and 6% this year, with data from last month pointing to a 7% rise. This increases the likelihood of monetary policy tightening in next month’s review.

While last month’s 25 basis point hike by Bank Indonesia (BI) went against polls, this month a second consecutive hike is expected as part of efforts to maintain the inflation under control. Its southeast counterpart – the Philippines – is likely to see a 50 basis point rise, with the Bangko Sentral ng Pilipinas (BSP) expected to maintain its hawkish tone.

Special reports:

United States – Chris Williamson

© 2022, IHS Markit Inc. All rights reserved. Any total or partial reproduction without authorization is prohibited.

Purchasing Managers’ Index™ (PMI™) data is compiled by IHS Markit for over 40 economies worldwide. Monthly data are drawn from surveys of senior executives of private sector companies and are available by subscription only. The PMI data set includes a headline figure, which indicates the overall health of an economy, and sub indices, which provide insight into other key economic drivers such as GDP, inflation, exports, l utilization, employment and stocks. PMI data is used by finance and business professionals to better understand where economies and markets are going and to uncover opportunities.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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