Treasurers weekly briefing #3

Arguably the big news for the UK this last week was the announcement that the UK public sector net borrowing (PSNB(ex)) was £8.1bn in October, and this compared with  Reuters’ consensus figure of £7.3bn. However on a twelve month basis, the rate of borrowing does appear to be declining, once distorting factors are excluded. In part this may well be a reflection of the marked uptick in UK economic activity.

Looking ahead to next week, for the UK, the main release is likely to be the money statistics, and given the strong performance of mortgage approvals in recent months, continued strength here may be in focus.

The second release of Q3 GDP is also produced, although data releases thus far do not appear to be suggesting any revisions.

For developed Europe more broadly, the main focus will be the November Euroland flash Harmonised Index of Consumer Prices (HICP). We can expect inflation to remain low for a protracted period of time, but perhaps not to fall further. Indeed in November, inflation could actually record a mild uptick.

For Sweden, we have growth data to be released, and we expect growth to have improved in Q3 and be in line with the Riksbank’s 0.5% qoq estimate.

Finally in Europe, politics may also attract some attention. In Germany, next week should end with the termination of the coalition’s negotiations, while in Italy, the Senate will vote on the ejection of Mr. Berlusconi.

Turning to the US, next week, durable goods orders data will be released, and will likely reveal a fall of some 1.5% in October on weaker aircraft orders – but ex-transportation, we may see an increase for the first month since June.

Also, a slight rebound is expected in Conference Board consumer confidence, whilst the Census Bureau will release September and October data jointly for housing starts, catching up after government shutdown-related disruptions. We expect shortness of supply to encourage small gains in October housing starts.

As for Asia Pacific, next week we are due Japan’s October industrial production, CPI, household consumption and the labour survey, all of which are scheduled to be released on 29^th November. We expect industrial production to show a month on month gain of about 1.7% while core CPI is expected to accelerate by 0.1pp to +0.8% year on year (yoy).

In China, no major data are scheduled to be released next week and elsewhere in emerging Asia, we are due India Q3 GDP, expected to have risen 4.6% yoy from 4.4% in Q2 and Philippines Q3 GDP to grow 7.3% from 7.5% in Q2. Additionally, Korea industrial production in October should rebound to 0.5% yoy from -3.6% in September.

With regard to central bank meetings and decisions due, in the emerging markets, we expect the Central Bank of Brazil to raise the policy rate by 50bps to 10.0%, while the Central Bank of Hungary should cut the policy rate by 20 bps to 3.2%. In addition, we expect central banks in Israel, Thailand and Colombia 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