Weekly Outlook: 16th-20th October


In the third quarter, the year-on-year (YY) Consumer Price Index (CPI) is anticipated to slightly decelerate to 5.9% from the previous 6.0%, while quarter-on-quarter (QQ) metrics are projected to rise to 2.0% from 1.1%. Various factors are influencing these projections, with notable contributions from spikes in fuel and transport costs, an increase in local body rates, and the annual hike in tobacco taxes during September. While these pressures have been partially offset by a decrease in food prices over recent months, the overall inflationary environment remains potent.

The Reserve Bank of New Zealand (RBNZ), utilizing forecasts disseminated in August, anticipates a Q3 YY rate of 6.0% and a QQ rate of 2.1%. Westpac, however, posits slightly milder figures with a QQ estimate of 1.9% and a YY forecast of 5.8%. This comparatively subdued outlook, especially against the backdrop of the RBNZ’s projections, is attributed to a lower forecast for tradable prices. Nonetheless, core inflation and non-tradable inflation are still projected to sustain their intensified levels.

RBA MINUTES (Tuesday):

The Reserve Bank of Australia (RBA) maintained the Cash Rate Target at 4.10% during its meeting on October 3rd, aligning with widespread expectations. Despite this being Governor Bullock’s first meeting, the RBA echoed familiar rhetoric from previous leadership, indicating a semblance of policy continuity. The central bank emphasized that additional monetary policy tightening might be necessitated, remaining steadfast in its commitment to steering inflation back to its target. The RBA confirmed its priority is to ensure inflation returns to the aimed 2-3% range within a reasonable timeframe and noted that while inflation in Australia has peaked, it will linger at elevated levels for an extended period. Additionally, the bank acknowledged significant uncertainties in the economic outlook.


In September, US retail sales are forecasted to exhibit a modest increase of 0.2% month-on-month (M/M), decelerating from the 0.6% growth observed in August. The core metric, which excludes volatile items like food and energy, is also expected to slow down, rising by just 0.1% M/M, compared to the previous 0.6%. Bank of America (BofA) reports that consumer spending has remained relatively stagnant over the previous two months, with total card spending inching up by 0.2% M/M and card spending per household increasing 0.7% year-on-year (Y/Y) in September. While the labour market plays a crucial role in consumer spending, BofA highlights a noticeable deterioration in the labour conditions for high-income segments, albeit this negative trend might be reaching its end. Nonetheless, higher-income households experience slower wage and salary growth compared to other groups. Moreover, Adobe predicts a 4.8% Y/Y increase in US online holiday sales, reaching USD 221.8 billion, with mobile shopping surpassing desktop for the first time and ‘Buy Now, Pay Later’ options anticipated to facilitate a record USD 17 billion in online spending, as consumers seek flexible budget management solutions amidst the slowing economy.


During the September policy meeting, the Bank of Canada (BoC) officials expressed their apprehensions regarding persistent and widespread inflation pressures, attributing the hike in some components notably above pre-pandemic levels to factors such as escalating shelter costs and high oil prices. The outlook anticipates a short-term rise in inflation, driven by increased oil and gasoline prices, with a gradual decline expected subsequently. The BoC is vigilant about monitoring the momentum in underlying inflation, especially concentrating on core inflation, which has proven to be resistant to change. They will also consider the economic supply and demand equilibrium when projecting future inflation. Although the Royal Bank of Canada (RBC) does not anticipate additional interest rate hikes from the BoC within the year in its base case, it acknowledged that the central bank is prepared to implement further hikes if deemed necessary to stabilize labour markets and mitigate inflation, pending a forthcoming monthly inflation report and the influential Business Outlook Survey before the next BoC meeting.

UK INFLATION (Wednesday):

Analysts anticipate the Year on Year (Y/Y) Consumer Price Index (CPI) for September to dip to 6.5% from the previous 6.7%, though consensus on other metrics remains undetermined. The last report was pivotal for the Monetary Policy Committee’s (MPC) choice to maintain the current rates in September due to reductions in headline, core, and services CPI – the latter recorded at 6.8%, notably beneath the Bank of England’s (BoE) prediction of 7.2%. A substantial portion of the services CPI drop was ascribed to decreases in airfares and package holiday costs. Investec analysts presume that September’s inflation continued to descend despite a surge in fuel prices. They predict potential upward pressures from education and transport to be counterbalanced by diminishing price pressures elsewhere, including decelerating inflation in food and clothing prices. Although the data is unlikely to notably influence pricing for the BoE’s November meeting (indicating a probable maintenance of current rates), a particularly aberrant release could sway expectations for 2024 rate cuts. However, due to forecasting challenges in the ongoing hiking cycle, market participants may lack strong conviction in making definitive predictions for the following year.


In the forthcoming release, the Core Year on Year (YY) inflation rate is anticipated to reduce to 2.7% from 3.1%. No forecasts have been provided for the headline YY or super-core YY, which previously stood at 3.2% and 4.3%, respectively. Referring to the Tokyo Consumer Price Index (CPI) – which slightly decreased to 2.8% from 2.9% due to reductions in utility tariffs and manufactured goods inflation – analysts at Capital Economics (CapEco) predict a parallel mild downturn in the approaching release. Notably, while the uptick in services inflation retracted last month, inflation is decelerating more gradually than the Bank of Japan (BoJ) projected. This necessitates a revision in inflation forecasts during their meeting scheduled for the 30th-31st of this month. Aligned with this, sources from Kyodo on October 10th indicate the BoJ is considering elevating its Fiscal Year (FY) 23/24 core CPI forecast near to 3% from the 2.5% predicted in July. CapEco projects the YY headline at 3.1%, core at 2.8%, and supercore at 4.1%.


September saw a moderation in Year on Year (Y/Y) retail sales, with the British Retail Consortium (BRC) indicating a 2.8% rise, decelerating from the previous 4.3%. A contributing factor to this slowdown is highlighted to be the surging cost of living, with households consequently reigning in spending—particularly on high-cost items like furniture and electricals. The Barclaycard’s report corroborates a mindful spending approach by consumers, who, while re-engaging with high-street shopping and enjoying early September’s favorable weather, are tactically budgeting in anticipation of the forthcoming festive period’s expenditures. In contrast, Oxford Economics anticipates a resurgence in September sales, especially in food sales which have been notably muted recently, and predicts possible recoveries in non-store and fuel sales following marked month on month drops in August.

Sources: PMT

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