Euro zone factory activity declined again in Sept as energy bills bite -PMI

Actual 48.4 (Forecast 48.5, Previous 48.5)

The pound may have recovered well after its crash on Monday but the heightened volatility isn’t exactly a good sign for the currency itself, as it is arguably a sign that traders are shouting for more credible policy between the central bank and the government. The dollar is little changed so far today after backing away from its highs in the past two days, with month-end and quarter-end trading also in focus. The swings are likely to continue today so that will make it tricky to interpret things until we get to next week.

All eyes will stay on the bond market as a signal for broader market sentiment but as mentioned above, there might be mixed flows taking place with month-end and quarter-end rebalancing also something to consider. The technicals are your best friend in these sorts of situation, so that will at least help provide some guidance amid the recent bout of volatility ahead of the weekend.

YTD industrial profits in China fall further.

-2.1% y/y

• prior -1.1%

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Lockdown impacts not going away. Lockdowns not going away either. Property sector has imploded under its crushing debt load.

Pressure on the yuan will continue. Even the People’s Bank of China is slamming it!

World Bank Group President David Malpass is speaking with US TV, Fox Business.

I’m not sure that saying that the current global economic slowdown may persist well in 2023 is adding too much new to the current pool of knowledge. Energy issues (especially for Europe), global central banks ramping rates higher, China malaise … none of these are fresh issues.

• expects world GDP to grow by 2.4% in 2022 – revised down by 0.5pp since the June GEO – and by just 1.7% in 2023, a cut of 1%
• eurozone and UK are now expected to enter recession later this year
• the US will suffer a mild recession in mid-2023
• “We’ve had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China”
• The forecast now assumes a full or near complete shut-off of Russian pipeline gas to Europe.

• Sees the German economy contraction by 0.7% in 2023 (previously predicted growth of 3.3% back in June)
• Sees inflation this year at 8.0% (up from 7.4% previously)
• Sees inflation next year at 8.7% (up from 4.2% previously)

On the forecast revisions, the firm says that “the recent price jumps for electricity and gas will noticeably reduce the purchasing power of private households and lead to a decline in private consumer spending”.

• estimate 0.7%, previous 0.5%

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annualised +3.5%

• expected 2.9%, prior 2.2%

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Private consumption +1.2% q/q

• capex +2.0% (prior 1.4%)

GDP y/y +3.6%

• expected 3.5%, prior 3.3%
• this is ‘real’ GDP, nominal was +4.1% q/q and 12.1% y/y

GDP q/q 0.9%

• expected 1.0%, prior 0.8%

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Chain Price Index, an indicator of inflation is +4.3%

• prior + 4.9%

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Q2 is April, May and June. The RBA began its interest rate hiking cycle in May and hiked again in June. Continued rate hikes in July, August and September might have more of an impact (not a positive one) on economic growth in Q3.