Japan: Capital spending a touch firmer than expected, but profits fall back from record high

According to the MoF’s capital spending survey, fixed investment (in nominal terms) rose at a slightly firmer pace than previously estimated in Q3, up 0.8%Q/Q, the fourth quarterly increase in five. This compared with a rise of 0.1%Q/Q estimated in the preliminary GDP release (and a drop of 0.3%Q/Q in real terms). This also left the MoF’s measure of capital spending up 9.5%Y/Y, the most in three quarters. Given new information on inventories, however, our colleagues in Tokyo expect limited overall impact on the second estimate of GDP (due a week today), with growth likely to be confirmed at 0.2%Q/Q. Within the other survey detail, sales rose for an eighth quarter out of the past nine (0.3%Q/Q), to leave them up 2.6%Y/Y. But profits fell a sharp 10.6%Q/Q from the record high in Q2 – perhaps reflecting the stronger yen – to be down 3.2%Y/Y, the first annual drop since Q422, with notable declines in the transport equipment, general machinery and construction subsectors. The weakening was concentrated among SMEs, however, with profits at large firms rising a further 4%Y/Y.

Looking ahead, the Japanese data highlights this week will be October’s wage and household spending releases on Friday. Average earnings growth is expected to be little changed from 2½%Y/Y, with scheduled earnings of full-timers expected to be a touch firmer at 3.0%Y/Y.

US: Payrolls likely to have bounced back following weather-driven slump in October

This week’s key release will be the US November labour market report on Friday. After the weather-associated lull in October – the increase of just 12k was the softest since December 2020 – non-farm payrolls are expected to have bounced back last month, with a rise of 200k to push the three-month average back up to 145k, close to September’s level. This would leave the unemployment rate unchanged at 4.1%. Average hourly earnings are expected to rise 0.3%M/M, to leave the annual rate edging slightly below 4%, but remain above July’s three-year low of 3.6%Y/Y. The JOLTS (tomorrow) and ADP reports (Wednesday) will provide further insights into the labour market, while the manufacturing and services ISMs (due today and Wednesday respectively), are likely to signal ongoing contraction in the former and solid expansion in the latter. Separately, Fed Chair Powell will speak in a moderated discussion (Wednesday), while – among other FOMC members in action this week, Fed Governor Williams and Waller are also due to give keynote speeches at events this evening.

Euro area: Revised euro area GDP and German IP figures due after today’s unemployment data

In terms of euro area data, the region’s jobless report (today) will likely show the unemployment rate stable around its historical low of 6.3% in October, highlighting the reassuring resilience of the labour market despite the recent weakening of growth momentum. Meanwhile, the final estimate of euro area GDP for Q3 (Friday) could bring a downward revision from the surprisingly strong preliminary 0.4%Q/Q estimate. Updated data from Ireland (Thursday) will give a greater guide. Friday’s estimate is widely expected to show that private and government consumption contributed positively to Q3 growth, consistent with the results of the member states. But, looking ahead, consumer spending in the euro area most likely fell at the start of Q4 (October retail sales figures due Thursday). Separately, ECB President Lagarde will give her quarterly update on economic and monetary policy developments to the European Parliament.

Among the data from the member states, German factory orders figures (Wednesday) are likely to reveal a non-negligible fall back in October after the strong performance in September (4.2%M/M) was boosted by an uptick in large-scale orders for transport equipment. In contrast, German industrial production might report a temporary boost in October, as payback to the notable drop at the end of Q3 (-2.5%M/M), but this will leave output on a downwards trend and well below the pre-pandemic average. The final composite PMI (Wednesday) is likely to confirm the deterioration in conditions flagged in last week’s flash survey.

UK: Final PMIs and BoE Decision Maker Panel surveys due

Another relatively quiet week ahead for UK data releases will focus on surveys. November’s final PMIs will arguably be the most notable after the flash release implied that firms were more downbeat amid an increasingly uncertain outlook. Policymakers will also take interest in the November BoE Decision Maker Panel survey (Thursday) after recent rounds encouragingly pointed towards ongoing moderation in agents’ price expectations. And with inflation expectations seemingly well-anchored close to the 2% target, which the MPC see as an important precondition for moderating wage and price pressures in the medium term. Meanwhile, after last week’s CBI survey added to concerns about weaker consumer demand in the run-up to the festive season, the BRC retail survey (tomorrow) will provide another perspective on activity on the high street in the middle of Q4.