In the last two weeks, the highlights for the markets were the monetary policy meetings, first of the European Central Bank (ECB) and then, on Thursday, of the US Federal Reserve (Fed). Once the investors have digested the messages from the two institutions, and if the corporate results season has not yet started (it will start in mid-October), this week the most important data to highlight is publication of inflation figures for September in the euro. zone.
As every month, the different economies of the eurozone will publish their inflation data on Thursday and, a day later, it is the turn of the aggregate for the entire region. In this case, expectations indicate that the moderate increase in inflation that has been going on for months will continue, with a new drop in the inflationary rhythm to 4.8% year-on-year in September, compared to 5.3% in the first month.
The case of Spain is the opposite: on Thursday the figures for the same month will be known, but in this case the forecasts point to growth above the level of August: an increase of 3.1% year -year is expected, compared to the previous 2.4%.
The underlying inflation data (excluding energy prices and the latest components of the basket) in the euro zone is one of the keys on this occasion, as it shows a resistance to fall which is more difficult than expected in recent months. From the manager MFS Investment Management they explain how “the picture of inflation is different for the main economies. In the United States, although inflation has increased, it seems to continue to be sticky, especially when the share of the services and the real estate sector,” they pointed out.
“In Europe, on the other hand,” they continued, “we have not yet seen the inflation ceiling in the underlying basket. Moreover, the latest data continue to show an upward trend in this indicator, something that worried and explained that the “ECB continues to push its monetary policy to a more aggressive stance,” they pointed out.
In fact, concerns about the macroeconomic situation have shifted from the United States to Europe. The changes in the macro view of the ECB and the Fed make it clear: for the euro zone, the organization led by Christine Lagarde cut the expected growth for the next year from 1.5% to 1%, to At the same time, the inflation estimate increased by two tenths, for 2023 and 2024, increasing the fear that the region will enter a state of stagflation.
In contrast, the Fed increased its US GDP growth estimate, from 1% to 2.1% in 2023, and from 1.1% to 1.5% next year, leaving it virtually unchanged.
Review of GDP and money supply
Apart from the European inflation data, next week there are events marked on the calendar that should also be kept an eye on. The change, on Thursday, in the GDP data for the second quarter of the US is one of them, and analysts expect the data to increase from 2.1% to 2.3%, removing fears of recession .
A day earlier, on Tuesday, the aggregate monetary supply data for the euro zone for September, known as M3, will be published and is expected to show a deterioration of -1.1%, a historical record for a month , compared to – 0.4% in August. This is an important indicator followed by the ECB to assess the liquidity available to the European economy, and its fall confirms the continuation of the slowdown in economic growth in the region.