Week Ahead

Dec 4th - Dec 8th

SWISS CPI (MON): It is currently unclear if the SNB will hike or not in December after it left rates unchanged in September, at 1.75%, though if a hike does occur it is likely to be the last. One key factor in the decision will be the November inflation report which will be the first reading encapsulating the mid-2023 rental reference rate increase. In relation to this, on November 1st, Chairman Jordan said domestic inflation is likely to increase in the coming months due to increased rent and energy prices, while Schlegel on the 10th said a "temporary" increase in inflation due to rent is possible. As a reminder, despite leaving rates unchanged in September the SNB incrementally trimmed its inflation forecast from Q3-2024 onwards but maintained the near-term view at just over the 2.0% target level.

AUSTRALIAN GDP (TUE): Q3 GDP Q/Q is seen at 0.3% (vs 0.4% previously), with Y/Y growth forecast at 1.7% (from 2.1% in Q2). Analysts at Westpac expect the Q3 Q/Q metrics to match the Q2 number and say "we assess that Australia's economy grew by 0.4% in the September quarter, following outcomes of 0.4% for both March and June." The desk also suggests that "the economy is stuck in the slow lane, as the intense headwinds of high inflation and higher interest rates impact. Domestic demand growth likely cooled, from a near 3% annualised pace over 2023H1 to a forecast 1.8% annualised pace in Q3." In the latest RBA monetary policy statement (7th November), Governor Bullock said "while the economy is experiencing a period of below-trend growth, it has been stronger than expected over the first half of the year." However, the latest Statement on Monetary Policy flagged overseas risks - "The near-term outlook is for relatively weak output growth in Australia's major trading partners, with risks tilted to the downside. Growth is expected to slow from 3½ per cent in 2023 to 3 per cent in 2024, well below average growth in the decade prior to the pandemic."

EZ RETAIL SALES (WED): Retail Sales M/M are forecast at 0.2% in October (prev. -0.3%), while the Y/Y was previously at -2.9%. The September M/M metric marked the third consecutive monthly contraction, in which sales decreased in Germany and Italy, but increased in France and Spain, indicating uneven private consumption trends across the Eurozone. Sales of non-food products dropped nearly 2% in September, while a significant increase in food purchases mitigated the overall decline in sales. Private consumption is expected to remain subdued, influenced by the ECB rate hikes which have increased debt servicing costs and encouraged more savings. Analysts at Oxford Economics say an uptick in private consumption is not anticipated until next year, likely following a decrease in inflation and consequent improvement in real incomes.

JAPANESE TOKYO CPI (THU): Core CPI is seen slowing to 2.4% from 2.7%. Headline inflation in Tokyo rose 3.3% in October, up from 2.8% in September and surpassing expectations. Analysts at CapEco expect the November number to fall to 2.9%, resuming the downward trend observed for most of the year. The main drivers for October included a significant rise in volatile fresh food prices and reduced subsidies for utilities. Fresh food prices are expected to have moderated in November due to a notable drop in wholesale prices, moving away from the seven-year high seen in October. CapEco suggests processed food and manufactured goods inflation have likely reached their peak, with anticipated further declines in November. "Services inflation is the one area where we expect further rises, and we expect it accelerated from 2.1% to 2.3% last month.", CapEco says.

CHINESE TRADE BALANCE (THU): The release will be gauged for domestic and foreign demand. In terms of the prior month's release exports weakened, with a Y/Y decrease of 3.1%, but still an improvement from -6.2% in September. Imports strengthened, showing a 6.4% increase vs a -0.8% decline in September. Desks have been warning that the decline in exports could negatively affect GDP growth from net exports in Q4, while the stimulus China announced over H2 so far will still need to fully feed through. Using the latest Caixin PMI as a proxy, the report noted "Demand expanded slightly, but the gauge for total new orders recorded the lowest reading this year…The economy has shown signs of bottoming out, but the foundation of recovery is not solid. Demand is weak, many internal and external uncertainties remain, and expectations are still relatively weak". Following last month's GDP metrics, analysts at ING said "Until we get a better idea of what is happening here, we are not going to be revising our GDP figures for the year, which we recently revised higher to 5.4% for the full year 2023. Whether there are the beginnings of a trade-off building between a weaker external environment and a firming domestic economy is an appealing hypothesis, but one that does not have enough support for now to run as a central forecast. Further data is needed."

CHINESE CPI (FRI): Last month's report stated thatCPI Y/Y was at -0.2%, M/M at -0.1%, and PPI Y/Y at -2.6%. Using the Caixin PMI data as a proxy for prices, the release suggested "Prices rose moderately. Although the gauge for input costs remained in expansionary territory for 40 months in a row, the reading in October was the lowest since June 2022, as the increases in the costs of labour, raw materials and transportation were limited. Part of the input cost increase was passed on to customers, with the gauge for output prices remaining above 50 for 18 consecutive months… companies continued to raise their own selling prices. Though modest, the rate of charge inflation was only fractionally slower than September's 18-month high." Last month, consumer prices fell back into deflation with desks highlighting sluggish domestic demand. That being said, it's also worth noting that the data could be influenced by the Chinese Singles Day shopping festival which ended on November 11th, although some analysts expect the impact to be muted.

US JOBS REPORT (FRI): Analysts expect 175k nonfarm payrolls will be added to the US economy in November; while that would be an acceleration in the rate of job additions vs the 150k added in October, it would still be cooler than recent averages (3-month average 204k, 6-month 206k, 12-month 243k). The unemployment rate is expected to remain unchanged at 3.9% (Fed projections in September saw the rate closing out the year at 3.8%, and its forecasts have pencilled in a rise to 4.1% in 2024). "All signs point to an ongoing cooldown across various measures of labour market activity," Moody's writes, explaining that the tick up in November jobs growth will be a function the impact of the United Auto Workers strikes in October rather than a resurgence in the labour market. That would be in keeping with reports in the Fed's recent Beige Book, which noted that demand for labour continued to ease. Still, Fed officials do not seem concerned; Fed's Waller notes that while the labour market is cooling, it still remains tight. Before the November jobs data on Friday, traders will note the October JOLTs data out on Tuesday; this is likely to show a continuation of the pullback in job openings as firms refine hiring plans given current economic conditions, Moody's says.