Treasurers weekly briefing #2

The data highlight for the UK will be release of the Public Sector Net Borrowing requirement on Thursday, 21^st November at 09:30 GMT.

The trajectory of the public finances appears to have started to improve in the past few months, possibly driven in part by better cyclical dynamics. We will watch for a continued pattern of improvement in this month’s figures. This will be the last set of public finance statistics before the Autumn Statement (Thursday, 5^th December). We anticipate that this could bring a considerable downward revision to deficit and debt projections.

For the UK, we’ll also get Rightmove House Prices for November on Monday, Bank of England (BoE) Minutes on Wednesday, and CBI Trends for November on Thursday. The BoE minutes could attract attention and any discussion of softer inflation or the path of unemployment will be in focus.

Elsewhere in developed Europe, several cyclical data points will be released, the most noticeable of which will be the German IFO survey and the PMIs. We expect both leading indicators to increase in November after the small dip recorded in October. For the IFO, we’re looking for 107.6. Meanwhile there are upside risks for the Euroland composite PMI due out on Thursday largely reflecting seasonal issues. We look for the Flash Composite to be reported at about 52.5, consistent with modest ongoing growth.

Turning to the US, thirteen economic reports will be released next week, as government agencies work off the backlog of data from resulted from the shutdown. The highlights include retail sales numbers, out Wednesday, which are expected to reveal a moderate gain, with the prospect of flat auto sales matching off with stronger discretionary retail spending associated with Halloween. We are also due CPI data on Wednesday which should touch a four-year low in year-on-year terms. Existing home sales are projected to fall to about 5.1m.

On Asia Pacific, in Japan, October trade data are due out on Wednesday with another significant deficit expected.  There are no major data releases for China scheduled for next week. Elsewhere in emerging Asia, Thailand’s 3Q GDP numbers are due out on Monday and are expected to be stronger at 3.3% yoy, from 2.8% yoy the previous quarter. Also, Singapore’s final 3Q GDP data re due on Monday and are expected to be revised up on the back of better manufacturing numbers. Meanwhile, Taiwan’s export orders for October are due out on Wednesday and are expected to be well down from the 2.0%yoy rise reported for September. Some are forecasting a year on year fall – and these data are important as bad numbers will encourage price deflation to gain volume, which will end up affecting UK inflation.

As for central bank meetings and communications, in the US, the minutes of the 29^th/30^th October meeting of the FOMC will be released next Wednesday. In its October 30^th policy statement, the FOMC dropped references to elevated mortgage rates and tightening financial conditions, and the minutes may shed some light on this decision and help markets determine the degree to which policymakers were more comfortable with the prevailing interest rate environment in late October.

In Japan, the BoJ meets on Wednesday and Thursday for its regular board meeting, and we expect it to keep its policy directive unchanged. In the emerging markets, we expect central banks in Chile, Turkey and South Africa to keep interest rates unchanged.

James Bevan is chief investment officer of CCLA, specialist fund manager for charities and the public sector. CCLA launched The Public Sector Deposit Fund in 2011 to meet the needs of local authorities and other public sector organisations. You can follow James on twitter @jamesbevan_ccla