Treasurers weekly briefing #5

Next week, in the UK the main economic number in focus will be Industrial Production (IP) with the data due on Tuesday 9^th at 0930hrs. We can expect softer numbers, perhaps -1.0%mm in October, after a strong 0.9%mm reading in September. While manufacturing PMIs suggest that output in this sector should remain solid, there are various idiosyncratic factors have the potential to push down industrial production. In particular mining and quarrying were unusually strong in September and this could unwind. Furthermore, it is possible that industrial disputes at a major refinery in Scotland will have depressed the headline data.

On Monday Bank of England Governor Mark Carney will be speaking in New York.

Elsewhere in Europe, German industrial production will provide the first evidence as to what’s been happening in Q4. We expect activity to rebound in October, and a strong reading in Germany would also support Euroland IP, which should record a mild positive print.

In Sweden, the November CPI release will attract much attention being the last relevant data release before the December 17^th monetary policy meeting. We think the Riksbank is more likely than not to remain on hold, but a negative surprise would change the balance of risks in favour of a cut. We expect the CPIF inflation rate to be unchanged from October.

Over in the US, strong auto sales should deliver a solid headline retail sales result, while modest growth is expected from non-auto sales. Headline PPI may show a small increase after two months in negative territory. And it looks likely that November’s core PPI gain will remain within the narrow 0.0% to 0.2% range seen since the summer of 2012. The Fed’s quarterly “Flow of Funds” report, to be released on Monday, is expected to show that household wealth hit a new record high in Q3, thanks to appreciation in both financial and real estate assets.

In the Asia Pacific region, for Japan, we can expect a small downward revision to the real GDP growth rate for Q3 (from +1.9% to around +1.6% quarter on quarter (qoq) annualized) and the current account balance will likely have returned to surplus territory (about ¥392.5 billion, seasonally adjusted) in October. Also, core machinery orders should post a small increase (0.7% mom from -2.1% month on month (mom) in September). In China, we expect November exports to grow at 6.5% year on year (yoy) and imports to grow at 7.2% yoy, and we forecast November inflation to rise slightly at 3.3% yoy from 3.2% yoy in the previous month and Industrial Production to grow at 10.1% yoy. Our current forecast for November new yuan loans is at 560bn while we expect retail sales & money supply to stay at 13.2% yoy and 14.2%, respectively.

In terms of central bank meetings and decisions, the Swiss National Bank (SNB) is expected to confirm both the exchange rate floor for EUR/CHF at 1.20 and the target range for the 3-month Libor at 0.00%-0.25% on Thursday. Due to persistent low inflation rates, we do not expect significant changes in SNB’s inflation forecast. Also, we expect the RBNZ to keep interest rates on hold.

In the emerging markets, Bank Indonesia meets. Although the favourable October trade number makes the meeting a close call, we have pencilled in a 25bp hike, taking the BI rate to 7.75% and the total tightening to 200bp. Elsewhere, we expect central banks in Korea, Philippines, Chile, Peru and Russia 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