The path of the world economy out of the coronavirus-driven recession will again be in focus this week when the International Monetary Fund releases an update to its 2020 World Economic Outlook.
Central to the new forecast will be the rising infection rates (again) across Europe and the US in particular as the long-feared second wave worsens. This alone will probably see growth downgraded again.
The major market-moving event this week is likely to be the launch of the new series of iPhones by Apple on Tuesday, US time (around 5 am Wednesday). US analysts say Apple is likely to issue an updated range of phones, with most if not all models 5G enabled. The SE model, launched earlier this year could be left out – Apple had the chance to give it 5G capabilities, but declined.
The week will end with the much-watched New Zealand general election where the government led by Prime Minister Jacinda Arden is expected to retain power. The only question is whether the Labour Party wins power in its own right or goes into a coalition with another party such as the current partner, New Zealand First led by Deputy PM, Winston Peters.
The US third-quarter earnings season gets underway with reports from the country’s five major banks on Tuesday and Wednesday and a couple of airlines (lots of red ink – see separate story).
The International Energy Agency releases its latest monthly update on Wednesday.
The IMF update will be issued tomorrow night, Sydney time, and is expected to confirm the path out of the depths of the slowdown in the June quarter remains patchy and stuttering for the global and many national economies.
In the June update the IMF forecast global growth this year at minus 4.9%, 1.9 percentage points lower than the first forecast in the April 2020 World Economic Outlook (WEO).
“The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast,” the Fund said.
“In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.
“As with the April 2020 WEO projections, there is a higher-than-usual degree of uncertainty around this forecast. The baseline projection rests on key assumptions about the fallout from the pandemic.” the fund cautioned.
Nothing much will change so far as the high level of uncertainty, especially with the confused and bitter campaign for the November 3 US presidential and congressional elections.
The IMF’s update will note that the Chinese economy is doing better than expected and this week there’s the start of a series of important updates for the month of September, the quarter, and the first 9 months of the year.
There’s data on September trade – exports and imports, car sales, new bank loans, inflation – consumer and producer – and money supply – all against a background of an economy doing better than at any time since February and a rising currency (see separate story).
Despite that improvement, the Fund will lower its growth forecasts for the rest of this year, but more importantly, for 2021. Some economists say the Fund could trim next year’s growth to less than 5%.
In Australia it will be a week dominated by the September labour force data and a speech from Reserve Bank governor, Philip Lowe – both on Thursday.
Consumer confidence post-budget will be measured on Wednesday by the release of the Westpac/Melbourne Institute monthly update.
Bank of Queensland releases its full-year figures with write-downs and doubt about a final dividend.
In Europe, the rising tide of new COVID-19 cases will dominate the week. Infection numbers are rising in the UK, France, Germany, Spain, and Italy and it is looking like the eurozone and the UK are heading for a second slump in the4th quarter as the region heads into the northern winter, driving people indoors and lockdowns are tightened.
Data on eurozone industrial production and trade figures for August data will be released, while in the UK jobs data will be closely watched for signs of rising unemployment as the government’s furlough scheme is unwound (page 4).
In Asia, China releases data on September’s vehicle sales, credit and money supply data with imports and exports data will be issued tomorrow, and consumer and producer price inflation figures on Thursday.
The AMP’s chief economist, Dr. Shane Oliver says “Chinese data is expected to show export growth running around 9.5%yoy but imports about flat (Tuesday), a fall in headline inflation (Thursday) to around 2%yoy and continuing solid growth in credit.”
Central bank meetings will be held in South Korea, Indonesia, and Singapore.
In the US, Dr. Oliver says we can expect to see continued strength in the NFIB small business survey (tomorrow) and in NY and Philadelphia regional manufacturing conditions indexes for October (Thursday) and solid gains in September retail sales and industrial production (Friday).
US consumer price inflation is out tomorrow night and Dr Oliver said in his weekend note that we can “expect to see a 0.2% rise in core US CPI inflation taking the annual rate to 1.8%yoy, which suggests core private consumption deflator inflation of around 1.5%yoy.
September quarter earnings reports will start to flow with consensus expectations for earnings to fall by -22% year on year, up from -32%yoy in the June quarter.”
