Week Ahead Economic Preview: Week Of 29 August 2022

 | Aug 28, 2022 09:11

A wealth of economic data will be released in the coming week with S&P Global Worldwide Manufacturing PMIs set to dominate headlines and the week closing off with US non-farm payrolls. In addition, Q2 GDP updates for India, South Korea, Italy, Canada, Poland and the Czech Republic will be watched for signs of slowdowns, as the global economy continues to face drawbacks from high inflation, growing uncertainty and rising interest rates. Industrial production data for Thailand, Japan and Brazil will be released, as well as a wealth of inflation data - which are expected to confirm the persistence of high price pressures.

Markets volatility has been intensified in recent weeks by rate hikes, energy market concerns and geopolitical tensions. Hence, PMI data - released towards the end of the week - will be watched with particular interest and will offer further updates on how economies are performing as recession fears grow. Flash data last week indicated a harder hit manufacturing sector where rates of inflation and the repercussions of supply disruption persist. Flash data pointed to outright contractions in the US, Eurozone and Japan, and additional colour on the global manufacturing outlook will be sought from the manufacturing PMIs for mainland China in particular.

US non-farm payroll data will likewise be highly anticipated by markets, notably as a key recession-risk indicator. While last month's data exceeded forecasts, this week markets are expecting a sharp reduction in non-farm payroll growth, with August figures predicted to come in at 290K (July: 528K).

Second quarter GDP updates provide a clearer look in the rear-view mirror, with markets set to keep an especially close eye on growth trends in Canada, South Korea, India and Italy. Growth is expected across the board, though moderations in the rate of expansion are likely to be seen, particularly in Italy.

Elsewhere, inflation data flows thick and fast with Eurozone flash figures arguably the most significant. At 8.9% in July, inflation is expected to have remained high in August. South Korean inflation figures will also be released, and like the Eurozone, rates are likely to be high.

h2 Global PMIs to provide guidance on industrial growth, supply chains and price pressures/h2

Global manufacturing PMIs are released in the week ahead, with the data coming on the heels of some disappointing flash PMI numbers. Looking across the four largest developed economies of the US, Eurozone, Japan and the UK (the 'G4'), output contracted according to the preliminary flash PMI data to a degree that - excluding the initial pandemic lockdowns - was the steepest since the global financial crisis in 2009. Output contracted in both manufacturing and services for a second successive month, with rates of decline accelerating.

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However, the surveys brought some tentative good news on the inflation front. Supply constraints, which have been a major driver of rising prices during the pandemic, showed signs of easing in August, with the number of supplier delivery delays across the G4 economies falling to the lowest since October 2020. At the same time, new orders for manufactured goods fell at one of the steepest rates seen over the past decade. This combination of falling demand-pull and supply-push inflation factors allowed industrial goods price inflation to cool sharply to an 18-month low.

The full worldwide release of PMIs will allow us to monitor these demand, supply and price developments further, with the inclusion of data for mainland China and developing APAC economies providing especially important new detail.