Week in Focus 28th Sept-2nd Oct.: US NFP, PCE, and ISM Manufacturing PMI, RBA, and EZ CPI

MON: BoJ Minutes (Jul Meeting), Chinese Industrial Profits (Aug) TUE: RBA Announcement (Sep), Spanish Inflation (Sep), Retail Sales (Aug), EZ Economic Sentiment (Sep), Canadian GDP (Jul), US JOLTS Job Openings (Aug) WED: UK Labour Party Annual Conference, Japanese Retail Sales (Aug), Australian CPI (Aug), Chinese NBS Manufacturing PMI (Sep), German Retail Sales (Aug), Swedish Retail Sales (Aug), UK GDP Final (Q2), French CPI (Sep), German Unemployment Rate (Sep), German State/National CPI (Sep), Italian CPI (Sep), US ADP Employment Change (Sep), US GDP Final (Q2), PCE Price Index (Aug) THU: Japanese Tankan Survey (Q3), Australian Balance of Trade (Aug), Swiss CPI (Sep), US Challenger Layoffs (Sep), US Initial Job Claims (Sep/26), US ISM Manufacturing (Sep) FRI: South Korean CPI (Sep), Tokyo CPI (Sep), Italian Retail Sales (Aug), EZ CPI (Sep), US NFP (Sep) WEEK AHEAD BOJ MINUTES (MON): BoJ will release the minutes from the 30th-31st July meeting next week, although they are viewed as stale and unlikely to provide any major fireworks given there was a more recent meeting just last week, when the central bank hiked rates by 25bps to 1.25%. Nonetheless, there were few surprises at the July meeting, when the central bank kept rates unchanged at 1.00%, as widely expected given it had hiked rates the month before, while the decision was made by an 8-1 vote. Board member Takata was the sole dissenter and proposed a 25bps rate hike, but the proposal was rejected by a majority vote. There was little deviation in the central bank's language, as it stated that it will consider the timing and pace of rate hikes while examining the likelihood of realising baseline scenario risks, with an eye on the impact of Middle East developments, and will continue to raise interest rates in response to economic and price developments, as well as financial conditions. It also reiterated that it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target, and noted that underlying inflation is likely to reach a level consistent with the price target between the second half of fiscal 2026 and fiscal 2027. In terms of the Outlook Report, real GDP forecasts for FY26 and FY27 were slightly raised, while the core CPI estimate was lowered for FY26 but raised for FY27. RBA POLICY ANNOUNCEMENT (TUE): The RBA is likely to hike rates at its meeting next week, with money markets pricing around a 92% likelihood that the central bank raises the Cash Rate by 25bps to 4.60% and just an 8% probability that rates are kept at the current level of 4.35%, while all of Australia's big four banks are calling for a hike at the upcoming meeting. As a reminder, the RBA kept rates unchanged at the previous meeting in August, as widely expected, with the decision made unanimously, while the central bank maintained a hawkish tone, stating that inflation remains elevated and too high, with risks skewed to the upside, although it noted that financial conditions appear somewhat restrictive and trimmed its CPI forecasts. Furthermore, it noted that inflation is not expected to return to around the midpoint of the target range until late 2027 and that the board remains focused on preventing high inflation from becoming entrenched, but also acknowledged that following three increases in the Cash Rate Target since the start of the year, financial conditions are now tighter than previously and the economy appears to be slowing as expected. Nonetheless, RBA Governor Bullock stuck to the hawkish script during the post-meeting press conference, where she stated that the board hopes to slow the economy, sees upside risks to inflation and will raise rates again if needed. She also revealed that the board did not discuss a rate cut at the meeting, only whether to raise or maintain rates, and noted that it is thinking hard about when it might be appropriate to raise rates and that it is possible another hike will be needed. The central bank's language since then has remained hawkish, with Governor Bullock stating that although growth in the Australian economy is slowing, some of the upside risks to inflation appear to be materialising, and noting that lowering inflation is essential. Assistant Governor Hunter noted that the board is concerned about inflation and has a low tolerance for it, adding that it may have to raise rates if there is a sense that inflation will be stronger. Furthermore, the data supports the case for a hike, as the latest monthly inflation data showed headline CPI Y/Y was firmer than expected at 3.5% vs Exp. 3.3% (Prev. 3.8%), while the RBA's preferred Trimmed Mean CPI Y/Y was 3.6% vs Exp. 3.5% (Prev. 3.6%), remaining above the central bank's 2-3% target. UK LABOUR PARTY ANNUAL CONFERENCE (WED): Serves as an early preview of the Autumn Budget, and will be scoured for any hints of a Spring election, given recent domestic press speculation. UK PM Burnham’s speech is set, according to him, to make it clear what his plans are for the country over the next 10yrs, and more specifically, his premiership. The details of which may be interesting, as if it contrasts significantly with the Labour manifesto, it could point to an early election. Ahead of the speech by Burnham, the BBC has reported that policy announcements are expected on each day of the conference from the 27th September onwards. Before Burnham, Chancellor Healey speaks on Monday, he is unlikely to front-run the budget, but, as always, the tone and framing of the economy from the Chancellor will provide insight. AUSTRALIAN CPI (WED): Australian headline CPI is expected to accelerate to around 4.0% Y/Y in August (prev. 3.5%), while Trimmed Mean CPI is seen unchanged at 3.6%. Higher fuel and energy costs are expected to drive much of the headline increase, while persistent housing and domestic price pressures are likely to keep underlying inflation elevated. Analysts have voiced concern that inflation is proving sticky, with the release due a day after the RBA policy decision. US PCE PRICE INDEX (WED): Analysts are currently forecasting the August PCE headline will rise +0.4% M/M (prev. 0.2%), and will be unchanged at 3.7% Y/Y; the core PCE measure is seen rising +0.3% M/M (prev. 0.2%), though the annual rate is also expected to remain unchanged at 3.3% Y/Y. In the month, headline CPI picked-up in pace to 0.4% M/M (from 0.1%), though the annual rate was unchanged at 3.4% Y/Y; the core gauge rose by 0.3% M/M, above the expected and previous 0.2%, though the annual rate of core CPI slipped to 2.4% Y/Y from 2.5%. Headline PPI also picked-up, printing 0.4% M/M (from 0.1%), in line with expectations, while the annual rate rose to 5.4% Y/Y (from 4.8%, and above the expected 5.3%); core PPI rose 0.2% M/M, below the expected and previous 0.3%, though the annual rate of core PPI climbed to 4.6% Y/Y from 4.3%, in line with expectations. At its policy meeting last week, Fed officials nudged up their headline PCE view for this year to 3.7% (from 3.6%), while core is seen at 3.4% Y/Y (revised up from 3.3%); both headline and core PCE are seen easing next year to 2.3% Y/Y and 2.5% Y/Y respectively. Fed officials broadly agree that inflation is too high, and have noted that it has been above target for more than five years. At his post-meeting press conference in September, where the Fed unanimously voted to hike by 25bps, Chair Warsh said summer readings showed no meaningful improvement in underlying trends, estimating August PCE at around 3.6% Y/Y and core at 3.2% Y/Y. Schmid and Barkin described price pressures as broad-based rather than confined to energy. Goolsbee and Musalem see a growing demand-driven element, and Paulson and Williams cite AI-related demand. Goolsbee and Hammack warned that supply shocks are proving persistent, and several officials see risks for prices as tilted to the upside. JAPANESE TANKAN SURVEY (THU): The BoJ Q3 Tankan Large Manufacturers Index is expected to rise to 23 (prev. 22), while the Large Non-Manufacturers Index is seen easing to 35 (prev. 37). Manufacturing sentiment is expected to remain supported by resilient global tech and AI-related demand, while services face pressure from high energy and input costs. The survey's capex plans, price indices and corporate FX assumptions will also be closely watched for signs that firms continue to invest and pass higher costs on to customers. SWISS CPI (THU): September inflation follows on from the month’s SNB policy announcement, where rates were maintained and the inflation forecasts upgraded. In August, CPI was 0.8% Y/Y, driven primarily by imported inflation at 1.5%. The breakdown showed upside in energy components, while domestic pressure came from housing rentals. Inflation in the period was also a result of the CHF’s performance. As a reminder, the SNB lifted its CPI forecasts across the horizon and particularly so in the near term, aside from the Q3 view, which remained at 0.7%. If correct, the 0.8% and 0.4% prints in August and July point to an uptick to around 0.9% in September. US ISM MANUFACTURING (THU): The ISM manufacturing PMI is expected to rise slightly to 55.0 in September (vs 54.6 in August). As a proxy, S&P Global’s flash manufacturing PMI jumped to 57.0 in the month (vs 53.9 in August), a 52-month high and the strongest improvement in business conditions since May 2022, with the output index rising to 56.7 (from 53.1), a 53-month high. Under the bonnet, all five components lifted the headline. Production growth revived after waning over the prior three months, reaching its fastest pace since April 2022, while new orders growth accelerated to the fastest in over four years, driven mainly by domestic demand as goods export volumes continued to fall. Inventories rose at a faster rate, and backlogs of work also increased. Supply chains added further support to the headline, with supplier delivery times lengthening to the most since July 2022, as raw material shortages became more widespread. On prices, input cost inflation in manufacturing picked-up but remained below the peaks seen in the early months of the Middle East war. On jobs, factory payrolls rose at the fastest rate since February 2021. S&P said manufacturers remained more upbeat than service providers, with factory confidence broadly back to its long-run average. TOKYO CPI (FRI): Tokyo Core CPI is expected to remain around 1.8% Y/Y in September, keeping inflation close to the BoJ's 2% target. Underlying inflation measures will also be watched for signs that domestic price pressures remain persistent, particularly following recent strength in services and corporate price pass-through. BoJ Governor Ueda also left larger or consecutive rate hikes on the table if inflation materially overshoots projections. EZ CPI (FRI): September preliminary HICP is expected to increase from 3.2% Y/Y to between 3.5% to 3.8%. The period’s flash PMIs showed an acceleration in both input and output prices, particularly with reference to services, as the energy shock continued to impact. As always, the components will be scoured for any signs of second round effects emerging in the bloc, as the ECB continues to say there are no material signs of such effects. The data won’t fully encapsulate the increase in diesel prices following the commentary by US President Trump on the product. Overall, the data will keep and potentially intensify hawkish market expectations around the ECB in play, justifying the view that October is a live meeting. US NFP (FRI): The current consensus looks for headline nonfarm payrolls to print 100k in September (prev. 162k; vs 3-month avg of 71K, 6-month avg of 107K, and 12-month avg of 50K). The unemployment rate is seen unchanged at 4.1%; at last week’s FOMC, participants lowered their end-2026 jobless rate view to 4.1% from 4.3%, and continue to see unemployment at this level next year; meanwhile, the Chicago Fed’s real-time unemployment rate forecast for September was little changed at 4.13% (vs the final 4.14% in August). Average hourly earnings are seen rising +0.3% M/M in September (prev. 0.3%), while the annual rate is expected to tick-up to 3.2% Y/Y (prev. 3.1%). Weekly initial jobless claims have remained low, printing 198k in the reference period that coincides with the BLS survey week (vs 207k into the August window), while continuing claims also moved lower between the two reference periods to 1.719mln (vs 1.771mln). Analysts at Barclays, however, say that while their usual claims-based models point to strong gains, alternative indicators suggest more modest growth, noting that seasonal adjustments are the key risk. The bank writes that using August 2025 factors, August payrolls would have shown a 74k fall rather than a 162k rise, and it expects the August data to be revised down, which it says would raise upside risks to the September figure; little revisions would point to a September print below 50k. Since the September FOMC meeting, Fed officials have broadly described the labour market as stable and close to full employment; Barr, Collins and Williams said risks to employment have receded, while Goolsbee said business contacts were seeing tighter conditions. Barkin was more cautious, noting slow job growth and a market that is not particularly tight. Musalem continues to argue that the labour market is not a source of inflation pressure. Policymakers’ focus is firmly on the inflation side of the mandate, which officials describe as persistent, broad-based and increasingly demand-driven. Policymakers like Barr, Musalem and Paulson have signalled further hikes may be needed, Williams sees another hike by year-end as reasonable, and Collins has also pencilled in one more this year. WEEK IN REVIEW CHINESE LPR (MON): The PBoC maintained its 1yr LPR at 3.00% and 5yr LPR at 3.50%, as expected, marking a 16th consecutive month of unchanged rates. Policymakers remained cautious on further easing amid pressure on commercial bank margins and a more hawkish global rates backdrop, while resilient exports and industrial activity have reduced the urgency for additional stimulus. Analysts also see China as increasingly late in its rate-cutting cycle, with further easing likely dependent on a more significant deterioration in domestic demand. SARB ANNOUNCEMENT (TUE): Africa’s central bank voted unanimously to raise rates 25bps, as expected, its second hike this year, taking the benchmark rate to 7.25%. Governor Kganyago said the committee also discussed a 50bps rise, as well as a hold, and described policy as marginally restrictive before the hike. The Governor also said that inflation must return to the 3% target as the fuel price shock fades. He warned that large, sustained shocks are more likely to cause second-round effects. The SARB raised its inflation forecasts to 4.4% for 2026 (from 4%), and 4% for 2027 (from 3.8%). It also lifted its oil assumptions to USD 90/bbl for 2026 (vs prev. view of USD 82/bbl) and USD 80/bbl for 2027 (prev. saw USD 75/bbl). Its adverse scenarios imply one or two additional hikes. Analysts at Citi said the outcome was relatively hawkish, citing the unanimous rate hike, intensified fuel-driven supply shocks, and concerns that services inflation remains elevated and sticky. UK FLASH PMI (WED): A mixed to softer set of UK data. Services and Composite missed while Manufacturing beat. Looking into the series, the September data pointed to a “worrying combination of disappointingly sluggish economic growth and intensifying inflationary pressures”. A dynamic that makes the BoE’s near-term decisions far from certain; albeit, on balance, the continued uptick in price pressures means the overall data remains indicative of a near-term hike. However, the c. 100bps of tightening markets at points implied across 2027 remains too hawkish given the tepid growth environment and risks/uncertainty into domestic events ahead, namely the October budget. EZ FLASH PMI (WED): September’s PMIs were led by Services and strong across the board at an EZ-wide level, pointing to quarterly GDP growth of 0.4% and indications of sustained momentum into Q4. A dynamic which, alongside the ongoing price pressures and global energy movements, means the ECB’s October gathering is live, as sources post-September suggested. For Germany, Composite and Services were strong though Manufacturing slipped slightly from August’s four year high. Internal commentary points to renewed inflationary pressure, and somewhat interestingly the September regional elections and increased government pressure were not overtly referenced as a point of uncertainty. A dynamic to potentially look to in the months ahead. France saw the same pattern as Germany, with Manufacturing relatively soft and potentially vulnerable to a further uptick in energy ahead. CHINESE PRESIDENT XI VISIT TO US (THU): Chinese President Xi's three-day US visit concluded with limited concrete progress despite a warmer tone between Washington and Beijing. The main economic outcome was a two-month extension of the existing US-China trade truce to 10th January, while no significant agreements were announced on AI, advanced chip restrictions or other structural trade issues. Overall, the summit provided a near-term period of stability in US-China relations but left the main trade, technology and geopolitical disputes unresolved. NORGES BANK POLICY ANNOUNCEMENT (THU): Hiked by 25bps to 4.50%, fulfilling the hawkish side of the 50/50 split on views heading into the meeting between a hike and a hold. The accompanying statement and forecasts were dovish in the near-term and slightly hawkish further out. More generally, it pointed to the policy rate needing to remain at the current elevated level for some time, and keeping optionality for further tightening if required. Accordingly, the forecast has reduced the odds of another hike by end-2026 somewhat, and if another move occurs it is seemingly likely during Q2-2027. The NOK strengthened on the announcement. SNB POLICY ANNOUNCEMENT (THU): As expected, the policy rate was held at 0.0%. The main update was the tweak to the FX language, which now shows "...willing to be active in the foreign exchange market..." from the June line of "If necessary, the SNB has an increased willingness to intervene in the foreign exchange market", omitting the "increased" framing; while pertinent, not unexpected given recent FX moves and associated inflation implications. Nonetheless, this weighed on the CHF. FX aside, inflation forecasts were lifted, particularly in the near-term; however, it remains well within the 0-2% band at all times. RIKSBANK POLICY ANNOUNCEMENT (THU): Held rates at 1.75%, in keeping with the majority of calls heading into the meeting. Within the commentary, and particularly the forecasts, a hawkish bias can be seen with the language being that "it is expected that the increases to the policy rate will begin this year", while the forecasts imply a hike around end-2026/start-2027 and then another one in the Q2/Q3-2027 period, and then thereafter there is some optionality of another hike having occurred by Q3-2028, a marked hawkish tilt vs the June projections. Albeit, this was caveated by the assessment that Q2 GDP strength was somewhat due to temporary factors, though the general commentary remained constructive. Modest SEK strength seen on the clear hawkish elements, before stabilising as positioning for a September hike unwound. BANXICO POLICY ANNOUNCEMENT (THU): The Banxico rate decision saw rates left on hold, as expected, at 6.50% in a unanimous decision. Headline and core inflation forecasts were raised, with the central bank now expecting inflation to return to the 3.0% target in Q4 2027, vs Q2 2027 previously. The central bank also adjusted its guidance, noting it will make decisions considering the ongoing disinflation process and the expected behaviour of its determinants, including exchange rate pass-through to consumer prices, slack conditions and inflation expectations. Previously, it said the board estimated it would be appropriate to maintain the reference rate at its current level. Banxico also pushed back on the correlation with Fed rate decisions, noting that "since macroeconomic conditions in Mexico are different from those in the United States, monetary policy would not have to react mechanically to the anticipated adjustments to the federal funds rate". Looking ahead, Pantheon Macroeconomics "continue to expect Banxico to keep the policy rate at 6.50% through the remainder of 2026." JAPANESE FLASH PMI REVIEW: Japanese private-sector growth slowed in September, with Composite PMI falling to 52.5 (prev. 53.5), Manufacturing PMI to 54.1 (exp. 55.0, prev. 54.9) and Services PMI to 51.6 (prev. 52.5). Despite softer activity, input costs remained at high levels amid a weaker JPY, higher energy prices and rising labour costs, while firms continued to pass much of these pressures on to customers. Employment growth also accelerated to a seven-month high. AUSTRALIAN JOBS (THU): Australian employment rose 39.5k in August (exp. +20k, prev. -15.9k), although the Unemployment Rate increased to 4.6% (prev. 4.5%) as Participation rose to 67.1% (prev. 66.9%). Westpac noted that labour supply continues to outpace demand, with employment growth still below working-age population growth, meaning slack is gradually building through higher unemployment rather than outright job losses. Some of August's employment strength may also reflect residual seasonality and could partially unwind in September.