Japanese sentiment surveys in focus this week
When Japanese markets reopen tomorrow, a key focus this week will be sentiment indicators, kicking off with the Cabinet Office’s latest economy watchers survey. While the current conditions index is expected to have recovered further in September, it is still expected to remain well below the key 50-level indicating improvement. On Wednesday, the Reuters Tankan for October will provide an update on business conditions at the start of Q4, while machinery orders data for August will offer a guide to private sector capex in the final quarter of the year. The BoJ’s quarterly consumer opinion survey will follow on Thursday, with households’ inflation expectations to be closely watched. Thursday will also bring the latest PPI numbers for September.

Euro area IP and goods trade reports and final inflation figures from member states
A relatively quiet week for top-tier euro area economic data will bring industrial production figures for August (Wednesday) and goods trade data for the same month (Friday). Based on figures already published by the member states, euro area IP is forecast to have risen by a little more than ½%M/M in August. Meanwhile, with the German trade surplus having narrowed to its smallest since 1992, euro area goods trade figures for August are likely to report a widening in the deficit from July’s record high (€40.3bn) due not least to elevated prices of imported energy. Ahead of these data, this morning brings the latest Sentix investor confidence survey, which is likely to flag the increasing recession risks across the euro area. Updated September inflation figures, including for the first time detailed breakdowns, are due from Germany (Thursday), France and Spain (Friday). These are expected to confirm the jump in the headline German HICP rate (up 2.1ppts to 10.9%Y/Y), as well as the drop in the equivalent inflation rates in France (down 0.4ppt to 6.6%Y/Y) and Spain (down 1.2ppts to 9.3%Y/Y).

Separately, there will be plenty of ECB-speak in the week ahead, including a Q&A with President Lagarde on Wednesday and a “fireside chat” with dovish Chief Economist Lane on Tuesday.

UK GDP and labour market numbers to be closely watched
Top-tier UK releases this week will include the latest official labour market figures (tomorrow) and GDP numbers for August (Wednesday). Despite a faltering economic recovery and a likely further easing in job vacancies over the summer, the labour market is expected to have remained very tight due not least to subdued supply. The unemployment rate is expected to be unchanged at 3.6% in the three months to August. And having accelerated in the three months to July, growth in nominal average weekly labour earnings is expected to rise 0.4ppt to 5.9%3M/Y including bonuses, and by 0.1ppt to 5.3%3M/Y excluding bonuses, to remain well above the BoE’s comfort zone. But given high inflation, real wage growth is likely to have remained firmly in negative territory. With respect to GDP, after rising by a smaller-than-expected 0.2%M/M in July, high-frequency data suggest that private sector services activity stalled in August. Indeed, retail sales fell by a sizeable 1.6%M/M that month, while the service sector PMIs suggested that activity moved broadly sideways. Admittedly, with car production having picked up amid easing supply constraints, manufacturing output may well edge higher. But overall, GDP is expected to have risen just 0.1%M/M in August, to leave it down 0.2%3M/3M. In addition, the BRC retail sales monitor (tomorrow) and RICS housing market survey (Thursday) are due this week.

Several BoE MPC members will speak publicly, including Governor Bailey and Deputy Governor Cunliffe (tomorrow) and Chief Economist Pill and (hawkish) external members Haskel and Mann (all Wednesday).

US inflation and retail sales numbers to be closely watched
Perhaps the key data focus this week comes from the US in the shape of Thursday’s CPI inflation release. Energy prices are expected to have fallen for a third consecutive month in September after a cumulative drop of more than 9% in July and August. Food prices appear likely to post another brisk increase, although softer than the rapid average of 0.9%M/M in the past 12 months. Overall, our colleagues in Daiwa America expect consumer prices to have risen 0.2%M/M, a touch firmer than in August (0.1%M/M), but nevertheless leaving the annual rate down 0.2ppt to 8.1%Y/Y, which would mark a seven-month low. However, with underlying price pressures broadening, core prices are expected to have risen a stronger 0.4%M/M, close to the average over the past twelve months (0.5%M/M) and leaving the annual rate up 0.2ppt to 6.5%Y/Y. Ahead of this will bring the PPI figures (Wednesday), along with the latest FOMC minutes from the 21 September. Meanwhile, focus on Friday’s University of Michigan consumer sentiment survey will on households’ inflation expectations, while elevated prices of household essential items will likely leave headline sentiment close to historically low levels. Friday will also bring the latest retail sales numbers for September, which are expected to show that sales were up last month (0.4%M/M) not least due to the values being flattered by higher prices. In terms of Fed-speak, Brainard and Evans are due to speak at a conference today, followed by Mester (tomorrow), Barr and Kashkari (Wednesday) and George and Cook (Friday).

Chinese inflation set to remain extremely subdued
The end of the week will also bring the latest Chinese inflation figures (on Friday). While these are expected to show the headline CPI rate increased to its highest since April 2020 (2.8%Y/Y), this remains very weak compared with international comparisons, with the core inflation rate likely to be close to just 1%Y/Y. Moreover, headline producer price inflation is forecast to have fallen to its weakest since the start of 2021, down 1.3ppts to 1%Y/Y. Friday will also bring the latest trade data for September, with export growth expected to slow sharply in part due to particularly strong growth a year ago.