Key themes for the week ahead – growth momentum & output, inflation, and US housing data.
A quieter week on the data front, but a lot of Fed speak this week.
There will be US Fed speeches on most days this week. Chair Powell was expected to speak later in the week – but this is not yet on the Fed calendar. The next FOMC meeting is two weeks away (2-3 Nov), so this will be the last week for signaling ahead of that meeting. There was much to digest from last week with CPI, FOMC minutes, and the flattening yield curve.
The FOMC minutes last week showed that an announcement on taper may be made at the Nov meeting. In a speech last week, Vice Chair Clarida indicated that inflation targets had been more than met and that labour market conditions for a taper had been “all but” met. A more cryptic reference to “very nearly”, or “almost”. Higher, and so far, more persistent inflation has been the theme markets have been digesting. Market estimates of hikes were brought forward, and the yield curve flattened as 1yr-7yr yields reached YTD highs by the end of the week.
In his speech last week, Vice Chair Clarida also noted ‘significant shifts in aggregate demand and supply’ (due to policies to manage the pandemic). He was referencing the impact of supply chain bottlenecks on output and prices that are persisting. This week, we’ll get a further reading of the impact of ongoing bottlenecks on growth momentum and output leading into Q4.
Firstly, US industrial production and Chinese industrial production data will round out the view of industrial output for Sep. Then, later in the week, the prelim Oct PMIs for a range of countries will be released.
Other inflation data out this week will round out the Sep data and includes the final Euro area CPI for Sep, NZ CPI (upside surprise earlier today), and Japan National CPI for Sep. The prior YoY CPI growth for Japan was -0.4%.
US housing data for Sep will be out this week – including existing home sales (exp 6.06m SAAR), building permits (exp 1.68m SAAR), and housing starts (1.62m SAAR).
The RBA minutes for Oct will be released and RBA Governor Lowe speaks this week.
This week, the US Treasury will settle approx. $298bn in ST Bills raising approx. $110bn in new money. This is a relatively heavy week for ST Bills. A number of additional Cash Management Bills (CMB’s) were added to the schedule last week and again this week to help manage Treasury spending leading up to debt ceiling and funding negotiations.
Approx. $19bn in ST Bills will mature on the Fed balance sheet this week and will be rolled over. The 5yr TIPS and 20yr Bond will be auctioned this week – and will settle around month end.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Also posted this week is a review of the major economic releases last week. Download the file here:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
