The latest October survey results of the German Center for European Economic Research (ZEW) paint a gloomy picture of -72.2 points when assessing the current economic situation, i.e. once again far below the already pessimistic value of -61.9 of the previous month. Thus, the lowest survey values since the financial crisis in 2008 were reached. Double-digit inflation and the prospect of energy shortages in winter are taking their toll and depressing sentiment in large parts of the euro zone. The poll numbers are beginning to reflect the extent to which the halt in Russian gas supplies is forcing industry to shut down operations, driving private heating costs through the roof and, on top of that, Germany's energy policy and decommissioning of nuclear power plants is calling energy security into question.
According to expectations of the German Ministry of Economics, the German economy is expected to shrink by -0.4% in 2023. The tighter monetary policy of the European Central Bank is likely to create further headwinds.
Industrial production in the USA rose by +0.4% in September, contrary to expectations of +0.1%. This subtle but stable increase is mainly due to the production of larger goods such as automobiles, where output is now back above pre-Corona levels. While inventories are rising again, prices for new and used cars are likely to ease slowly. One risk here, however, is the energy crisis in Europe, which could trigger renewed supply chain shocks.
The Bank of England (BoE) will begin with its delayed bond sales in two weeks on November 1. But initially, the long-dated debt that has been at the heart of recent turmoil, will not be included. The bond sales will be distributed evenly across the medium and short maturity sectors during the fourth quarter of this year. The sales over that period should be conducted at a similar size and frequency as previously announced. If the earlier postponement relative to its previous sales plan would result in a shortfall, that would be incorporated into sales of subsequent quarters. This move highlights the concerns regarding liquidity of longer British government bonds (“Gilts”) after the British national bank has ended an emergency bond-buying program with the goal of easing forced selling by leveraged liability-driven investors like pension funds.
|08:00||UK||Consumer Price Index (year-on-year)||9.9%|
|11:00||Eurozone||Consumer Price Index (year-on-year)||9.1%|
|13:00||US||MBA Mortgage Applications||-2.0%|
|US||Procter & Gamble||Q1 23|
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Source: LGT Bank (Switzerland) Ltd.
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