This week features several events related to data, including the advance estimate of Q3 GDP, PCE inflation and personal income & spending. However, most of the significant upcoming events are scheduled for early November. For example, between 2-8 November there is an FOMC meeting, an employment report and US mid-term elections.
The data being released next week is expected to show some resilience, including a rebound in Q3 GDP growth to 2.3% following two quarters of contraction (-1.6% and -0.6%). However, this projection will be finalized after more data is released next week. The headline reading will likely be driven by a sizable boost from net exports that could approach 2ppt (percentage points), but we also expect consumption and non-residential fixed investment to contribute positively as well.
Inflation is still a problem, and the September Personal Consumption Expenditures data will likely only reflect that. The overall PCE deflator is predicted to go up 0.3% from the previous month, with the year-over-year pace increasing to 6.3% from 6.2%, while the core PCE deflator leaps 0.5% resulting in a 5.2% YoY rate which would be its second consecutive monthly acceleration after 4.9%.
In the next few months, the economy is predicted to remain stable and potentially grow again. However, by early next year we foresee a recession taking place due to high inflation rates and an aggressive Federal Reserve.
The Hot Zones this Week
Each week there are zones where trading can get wild. I call these the hot zones.
- Tuesday – Consumer Confidence
- Friday – PCE Prices and PCE prices Core
Global Spotlight
Since Liz Truss’ resignation Oct. 20, the governing Conservative Party has been in a rush to appoint a new party leader, who will become the next prime minister of the United Kingdom. Would-be candidates have until Oct. 24 to announce their plan to run. After that, the357 Conservative members of the House of Commons will vote by secret ballot. If only one candidate receives support from 100 or more Conservative members of parliament, that candidate will automatically become party leader and prime minister without a second leadership contest. The Conservative party will release the name of the new British Prime Minister by October 28th. If two or three candidates pass through, members of the Party will vote online to select a winner.
The National Congress of the Communist Party of China ends. On the last day of the 20th Party Congress, Oct. 22, delegates will vote on members of the new Central Committee and approve changes to the Party constitution. On Oct. 23, the first plenum of the 20th Central Committee will meet. China’s new leaders of the Politburo Standing Committee — effectively President Xi Jinping’s Cabinet — will reveal themselves when they walk on stage next to Xi. The individuals who fill Party positions such as premier and leader of the legislature will be Xi loyalists, but this does not necessarily mean that all standing committee members are also his followers. These key figures will show how different departments in the Chinese government will function over the next five years.
On October 20th, Ethiopia’s government stated that it would be part of peace talks in South Africa. These talks come after the Tigray People’s Liberation Front said they’re ready to return to negotiations on October 24th. Originally, both parties agreed to engage in conversation on October 8th in South Africa, but the meeting was put off because of supposed problems with logistics. As Ethiopia and Eritrea have increased military conflict in the Tigray region, there has been a worldwide response of shock due to reports of human rights violations, airstrikes, and blockades on aid. Although both sides have shown a willingness to come to the table, there are several potential roadblocks that could prevent any real progress from being made. These spoilers include Eritrea and numerous active regional militias. If negotiations proceed as they are currently going, it is likely that the fighting will continue for some time.
The Saudi government will be hosting the Future Investment Initiative from Oct. 25-27 in Riyadh to present investment opportunities available in the kingdom to foreign investors. The “Davos in the Desert” will feature numerous projects that match Crown Prince Mohammed bin Salman’s aim to economically diversify by 2030. Now that President Joe Biden has visited the kingdom, this year’s Future Investment Initiative will be the first since then. The visit granted Crown Prince Mohammed bin Salman additional legitimacy amid his efforts to improve his image following the 2018 murder of Saudi journalist Jamal Khashoggi. This scandal temporarily decreased investor interest in the summit, but now things are back on track. This year’s summit is expected to bring in a lot of attendees and investors, even though the United States isn’t sending government officials because of U.S.-Saudi tensions.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Week’s Numbers
Review Last weeks numbers here.
Earnings
Aggregate Estimates and Revisions
- 22Q3 Y/Y earnings are expected to be 3.1%. Excluding the energy sector, the Y/Y earnings estimate is -3.5%.
- Of the 99 companies in the S&P 500 that have reported earnings to date for 22Q3, 74.7% have reported earnings above analyst estimates. This compares to a long-term average of 66.2% and prior four quarter average of 78.1%.
- During the week of Oct. 24, 163 S&P 500 companies are expected to report quarterly earnings.
Source I/B/E/S data from Refinitiv
