Introduction

A great shell shortage is being widely reported among global central bankers, who now have little left to fire off after years of heavy and often spectacular barrages. But there was good news in the week. The latest set of economic data are really no more discouraging than the prior week or the week before that. A bad stumbling in the US capital goods sector is probably the week's most pressing headline but initial PMI indications out of Europe and Asia do show hope for October, at least a little hope in isolated spots. But first we'll start with the European Central Bank which kept policy frozen in place, at least for now.

The economy

Monetary policy

The ECB's October meeting, the last with Mario Draghi as president, concluded as expected with no change to the bank's monetary stance. Following September's easing package, the announcement of any fresh measures would have come as a major surprise and, by potentially boosting concerns over the state of the Eurozone economy, might well have backfired anyway. Accordingly, the refi rate remained at 0.00 percent, the recently cut deposit rate at minus 0.50 percent and the marginal lending rate at 0.25 percent, all record lows. Forward guidance has the Governing Council continuing to expect key interest rates to hold steady or move lower until inflation turns higher to the bank's 2 percent target. Regarding quantitative easing, planned net asset purchases of €20 billion per month, as stated in September, will start in November.

Like the statement, Mario Draghi's press conference offered little for financial markets to get their teeth into. The overall tone of the president's address was again dovish, highlighting downside risks to the economic outlook and weak inflation pressures. Predictably, there were also further calls for a more stimulative fiscal policy, particularly from those Eurozone governments where public sector balances are in small deficit or in surplus. Christine Lagarde will be in the hot seat at the next and final ECB meeting of the year on December 12th. The incoming president was in attendance but did not take part in the discussions. The chances are that current splits over monetary policy mean that changes in official interest rates and QE will be on hold at least into early 2020.

Capital goods

Unlike the ECB, the Federal Reserve may well be easing policy further before year end, chances that have likely increased following an emphatically weak set of durable goods data for September that raise the alarm over the health of the US manufacturing sector. Core capital goods orders (nondefense ex-aircraft) fell an unexpected 0.5 percent in September with August revised sharply lower and suddenly showing a 0.6 percent decline that followed no better than no change in July. Breaking down capital goods orders, weakness appeared to be concentrated in fabrications, down 1.5 percent in the month, and computers which fell 0.9 percent. Machinery actually rose 0.2 percent in the month but benefited from an easy comparison following 0.3 percent and 1.0 percent declines in the prior two months. Communications equipment, like machinery, also rose in September but following even steeper declines. Turning to capital goods shipments, they fell 0.7 percent in September following no change in August and another 0.7 percent decline in July. These three shipment results will be part of the third-quarter GDP mix for nonresidential investment, a component that may well be in descent and which the Fed may well tie to weakening global demand for high-end US goods. Outside of capital goods, aircraft orders continued to suffer in a year made tougher by the Boeing 737 grounding while motor vehicles in September were pulled down by the GM strike. All these issues – capital goods, Boeing, GM – will no doubt be addressed by Jerome Powell when he speaks after the coming week's FOMC where, by the way, Econoday's consensus is split nearly evenly between a rate cut and no rate cut.

Purchasing managers indexes

Flash reports from Markit Economics offer some of the earliest indications on how October will shape up as an economic month, and the news is not that bad with Germany, however, an exception. Germany's manufacturing PMI has been sending the most ominous signals of any prominent indicator all year including October where the flash came in at 41.9 and very little changed from August's 41.7 which stands as a ten-year low. The concern among German policy makers is that contraction in manufacturing will slow growth in services which is what's happening, at least for the last four months in this report. The services PMI flash came in at 51.2 for a 2 tenths decline and a three-year. New orders between the two samples fell for a fifth time in six months with services experiencing their steepest drop in six years. There were fresh contractions in both the domestic and overseas markets and backlogs were down for a twelfth successive month and at the fastest rate in nearly seven years. As a result, overall employment decreased for the first time in six years as headcount growth slowed in services and the decline in manufacturing steepened. Business sentiment duly worsened further with expectations sliding to their lowest level since November 2012. Meantime, inflation pressures eased as aggregate costs rose at their slowest rate in more than three years and output prices posted their smallest gain in 3-1/2 years as factory gate charges continued to slump. With overall demand contracting and sentiment at multi-year lows, there is nothing here to boost hopes for any pick-up in economic growth this quarter.

The news out of Japan isn't actually any better in October than in September (actually it's a bit worse), but compared to Germany, this manufacturing sample is still close to the waterline. Japan's manufacturing flash for October came in at 48.5, down only 4 tenths from September yet still a 3-year low. This index has been in contraction for eight of the last nine months. Employment in the sample improved though new orders and business confidence both weakened. And what is not good news for the Bank of Japan in its long odyssey to lift inflation, both input costs and output prices rose at a slower pace. On the services side, the flash index fell very sharply, down 2.5 points to 50.3 to indicate the weakest growth pace in more than a year. Export orders and employment as well as output were down, but not new orders where growth, in an important positive, strengthened.

One economy that looks like it will stay afloat is France where the final quarter of the year looks to have started on a hopeful note. October's manufacturing flash weighed in at 50.5, a 0.4 point rise versus September though still uncomfortably close to the 50-expansion line. Its services counterpart posted a more impressive 1.8 point gain to 52.9. Demand for manufactured goods saw a small decline but not demand for services which saw a sizable gain. Headcount rose in both samples and capacity pressures tightened as overall backlogs climbed to a four-month high. Even so, business sentiment towards the year ahead, while still optimistic, eased to a four-month low. Price data were mixed with manufacturers reporting the fastest rate of decline in 3-1/2 years in contrast to service providers where costs climbed sharply. October's flash results were better than expected and suggest that overall economic growth could acquire some additional momentum this quarter. That said, current trends remain relatively subdued.

Flash October data were also posted for the US where, however, these reports, which are produced by Markit Economics, are overshadowed by similar and longer standing reports produced by the Institute For Supply Management. For economic forecasters, ISM manufacturing is one of the most closely tracked of any reports out of the US, including monthly employment from the Labor Department, in sharp contrast to the manufacturing PMI where forecasts are harder to come by. The accompanying graph tracks the green line of the manufacturing PMI with the blue line of the ISM and the former has not been offering much of a gauge for recent movement in the latter. In what has been a contrast to the ISM, Markit's manufacturing PMI is showing stability and slight but still tangible acceleration. October's flash of 51.5 was up 1/2 point from September and more than a full point from August in a result that may or may not, however, affect expectations for next week's ISM which has been falling sharply to a multi-year low of 47.8 in September. Econoday's initial consensus for next week's ISM is improvement but another month of contraction at 49.0.

Confidence indicators

Purchasing managers indexes, whether from Markit or ISM, offer some of the very first news for any particular month. Confidence indexes, whether on the business side or the consumer side, also offer some of the first indications. And much like the PMIs, news for October is no better than mixed at best. Despite the relative strength of the French economy, sentiment in manufacturing is deteriorating markedly according to the latest INSEE survey. At 99, the headline climate indicator is down 3 points so far this month and below its 100 long-run average for the first time since March 2015. The unexpected decline reflects weaker output as well as shrinking order books which are at a 4-month low. General production expectations have also softened. Outside of manufacturing, however, morale is holding up a good deal better. With services, retail trade and construction all matching their respective September levels, economy-wide sentiment is just 1 point softer at 105 and still above its historic 100 mean. In fact, this measure has held within a tight 104-106 range since February.

Whether for confidence indexes or many other measures including production and inflation, economic data over the past three years are showing a similar parabolic shape, starting low then peaking in the middle and then falling back to where they started. A look at the graph for EC consumer confidence offers another example of this trend but one with a little twist. Consumer confidence deteriorated somewhat in October according to the results of the EU Commission's latest survey. At minus 7.6, the headline index was more than a full point below its final minus 6.5 reading in September and on the soft side of market expectations. October's drop more than reversed the previous period's 0.6 point bounce and put the index at its lowest level since last December. That said, the range during 2019 to date has been only 1.1 points wide so the trend, after a bottoming in January, remains essentially flat. This is in keeping with what has been a broadly stable profile to Eurozone retail sales since April which is a reminder that strong labor markets across regions have been helping to underpin consumption.

International trade

Trade data have also been showing a parabolic shape or at least hints of one, that is flat rates of growth several years back followed by peak rates of growth in early 2018 then flat rates recently. The graph for Hong Kong, an economy in sharp focus due to civil unrest, looks like many others. Exports in September dropped 7.3 percent on the year after falling 6.3 percent in August, while imports declined 10.3 percent after falling 11.1 percent. External demand from major markets was again weak, with exports to mainland China down 4.6 percent on the year and those to the US dropping 24.3 percent, considerably weaker than the 8.8 percent decline recorded previously. Officials again cited weaker global growth and ongoing trade tensions between the US and China as factors weighing on exports and noted that these factors continue to represent downside risks to what they already expect will be weak performance in the near-term. All together, Hong Kong's merchandise trade deficit deepened from HK$28.0 billion in August to HK$31.6 billion in September.

MARKETS: Global stocks building momentum for year end

However flat at best economic data are, it was another strong week for the global stock markets including an outstanding one for Singapore's Straits Times which gained 2.3 percent. Singapore posted industrial production data on Friday and the news was good, or least it was better than before as year-on-year change popped back into plus column though just barely at 0.1 percent for September. Still, this is the best showing since April as biomedical output jumped further and declines in electronics eased. But dovish central bank policy perhaps more than industrial improvement may be the bigger plus for the Straits Times as CPI data out  earlier in the week proved very flat with the year-on-year core sinking another 1 tenth to plus 0.7 percent for the lowest showing in 3-1/2 years. This is even below what the Monetary Authority of Singapore expects this year which is the lower end of a 1.0 to 2.0 percent range with more erosion expected for 2020, between 0.5 and 1.5 percent. The bank eased policy earlier in the month and said they are targeting a slightly slower rate of appreciation for the Singapore dollar. Other movers in the week included the FTSE which jumped 2.4 percent as unfolding developments out of the UK, including Parliament's vote on Tuesday to accept in principle Boris Johnson's plan for Northern Ireland as well as the EU's acceptance on Friday of a deadline extension, appear to be hinting at increasing chances for something other than a completely hard Brexit. And the DAX, despite the recession warnings coming out of Germany, gained 2.1 percent to lift its year-to-date gain to 22.1 percent. Daimler, the automaker, rose 8.7 percent on the week after reporting earnings that were boosted by gains for cars and vans that offset declines for heavy trucks where related plants in the US and Mexico are now being cut back.

The bottom line

"Don't fight the Fed" is the saying in the US when rates are going up, the mirror side of course is play along with the central bank when rates are doing down. And rates are going down across most central banks which is making for a very good year for the global stock markets, or at least isn't standing in the way of one. For the global economy, though, 2019 looks to be remembered as a year when counter-cyclical monetary policy (amid the risk of too little too late) was clearly needed.

**Jeremy Hawkins and Brian Jackson contributed to this article

Week of October 28 to November 1

One of the busiest weeks of the year will be highlighted on Wednesday with the FOMC announcement where expectations are slightly tilted, and only slightly, toward a 25 basis point rate cut. No changes are expected from the Bank of Japan nor from the Bank of Canada, also both on Wednesday. Likewise posted on Wednesday will be GDP data out of the US where, like US employment data on Friday, moderation is the general expectation. Eurozone GDP on Thursday is also expected to moderate with barely any growth at all the consensus for the quarterly rate. Following the prior week's run of PMIs, Chinese editions will be posted at midweek amid flat expectations here also. Inflation data will also be heavy in the week including quarterly consumer prices out of Australia on Tuesday and monthly consumer prices out of Germany on Wednesday. Core inflation in the US will be posted Thursday amid wide expectations for little or no improvement. Mixed in the week's run will be consumer confidence out of the US, industrial production out of Japan, and CIPS/PMI manufacturing data from the UK.

US Consumer Confidence Index for October (Tue 10:00 EDT; Tue 14:00 GMT)

Consensus Forecast: 128.6

The consumer confidence index fell back sharply in August and included downgrades for the employment and income outlooks as well as a reversal to negative in stock market sentiment. For October's index, Econoday's consensus is a bounce back to 128.6 versus September's 125.1.

Australian Third-Quarter CPI (Tue 20:30 EDT; Tue 00:30 GMT; Wed 11:30 AEDT)

Consensus Forecast, Year-over-Year: 1.7%

Third-quarter consumer prices are expected to rise a year-on-year 1.7 percent versus 1.6 percent in the second quarter which was the fourth straight quarter below the Reserve Bank of Australia's 2.0 to 3.0 percent target range.

Bank of Japan Announcement for October (Any time Wednesday local time)

Consensus Forecast, Change: 0 bp

Consensus Forecast, Level: -0.1%

No change is expected for the Bank of Japan's announcement with the short-term policy rate for excess reserves remaining at minus 0.1 percent and the target level for the long-term 10-year yield at around zero percent. At its last announcement in September, the BoJ warned that downside risks to the global economy were increasing and that momentum to achieve its 2 percent inflation goal could be "lost".

French GDP Third-Quarter Flash (Wed 02:30 EDT;  Wed 06:30 GMT;  Wed 07:30 CET)

Consensus Forecast, Quarter-to-Quarter: 0.2%

Second-quarter real GDP in France expanded 0.3 percent with third-quarter growth expected to come in at 0.2 percent.

Eurozone: EC Economic Sentiment for October (Wed 06:00 EDT; Wed 10:00 GMT; Wed 11:00 CET)

Consensus Forecast, Economic Sentiment: 101.4

In the worst outturn in more than three years, the European Commission's economic sentiment index unexpectedly fell 1.4 points to 101.7 in September. For October, the consensus is no recovery but further slippage to 101.4.

US GDP: 3rd Quarter, 1st Estimate, Q/Q SAAR (Wed 08:30 EDT; Wed 12:30 GMT)

Consensus Forecast: 1.7%

Real Personal Consumption Expenditures

Consensus Forecast: 2.6%

Fundamentally supported by consumer spending, third-quarter GDP is expected to rise at a 1.7 percent annual pace versus 2.0 percent in the second quarter. Consumer spending, which has been offsetting weakness in other categories, is seen slowing from a torrid 4.6 percent second-quarter pace to 2.6 percent in the third.

German Preliminary CPI for October (Wed 09:00 EDT; Wed 13:00 GMT; Wed 14:00 CET)

Consensus Forecast, Year-over-Year: 1.1%

Slowing in food costs held down September consumer prices which in October are expected to slow 1 tenth to a year-on-year 1.1 percent.

Bank of Canada Announcement for October (Wed 10:00 EDT; Wed 14:00 GMT)

Consensus Forecast, Change: 0 bp

Consensus Forecast, Level: 1.75%

Underscoring that headwinds from US-China tariff hikes were increasing and that earlier strength in GDP could prove temporary, the Bank of Canada nevertheless kept rates steady in their last meeting in September and no change is expected for the October meeting with the policy rate seen holding at 1.75 percent.

Federal Reserve Announcement for October (Wed 14:00 EDT; Wed 18:00 GMT)

Consensus Forecast, Change: -0.25%

Consensus Forecast, Midpoint: 1.625%

A 25-basis-point rate cut is the consensus but far from unanimous call for the October policy meeting after the FOMC, citing global slowing and trade tensions and the associated risks to domestic manufacturing, cut rates in August as they did in July by an incremental 25 basis points. Yet they also stepped back from signaling any further rate cuts and Econoday's sample is nearly split for October.

Japanese Industrial Production for September (Wed 19:50 EDT; Wed 23:50 GMT: Thu 08:50 JST)

Consensus Forecast: 0.3%

Industrial production in Japan has been up and down and was down 1.2 percent on the month in August. A 0.3 percent bounce higher is the expectation for September.

China: CFLP Manufacturing PMI for October (Wed 21:00 EDT; Thu 01:00 GMT; Thu 09:00 CST)

Consensus Forecast: 49.8

The CFLP manufacturing PMI in September came in above expectations but at a still subdued 49.8 which is where forecasters see the index holding in October in what would be the sixth straight month below 50.

Eurozone GDP Third-Quarter Flash (Thu 06:00 EDT; Thu 10:00 GMT; Thu 11:00 CET)

Consensus Forecast: Quarter-to-Quarter: 0.1%

Consensus Forecast, Year-over-Year: 1.1%

Third-quarter Eurozone GDP is expected to slow to a quarterly 0.1 percent increase versus a 0.2 percent increase in the second quarter. Yearly growth is seen slowing to 1.1 percent increase versus 1.2 percent growth in the second quarter (revised from a flash of 1.1 percent). Household spending slowed in the second quarter while fixed capital formation accelerated.

US Personal Income & Outlays for September (Thu 08:30 EDT, Thu 12:30 GMT)

Consensus Forecast, Personal Income, M/M: 0.3%

Consensus Forecast, Consumer Spending, M/M: 0.2%

Consensus Forecast, Core PCE Price Index, M/M: 0.1%

Consensus Forecast, Core PCE Price Index, Y/Y: 1.7%

Forecasters see no more than moderate rates of growth for both income, at a consensus 0.3 percent, and spending at a consensus 0.2 percent in September. Core inflation data are not expected to show improvement, at only a 0.1 percent rise monthly for 1.7 percent year-on-year growth that would be down from 1.8 percent in August.

China: Caixin Manufacturing PMI for October (Thu 21:45 EDT; Thu 01:45 GMT; Fri 09:45 CST)

Consensus Forecast: 51.0

The Caixin PMI moved solidly higher in September, up 1 full point to a much better-than-expected 51.4. Though still subdued, September's result was the best since February last year. The consensus for October's index is 51.0

UK: CIPS/PMI Manufacturing Index for October (Fri 05:30 EDT; Fri 09:30 GMT)

Consensus Forecast: 48.3%

Not benefiting from the approach of Brexit deadlines, the last five CIPS/PMI manufacturing headlines have been in sub-50 contraction with no improvement expected for October, with the consensus looking for a repeat of September's 10-year low of 48.3.

US Employment Report for October (Fri 08:30 ET, Fri 12:30 GMT)

Consensus Forecast: Payrolls Change: 93,000

Consensus Forecast: Manufacturing Payrolls: -50,000

Consensus Forecast: Unemployment Rate: 3.6%

Consensus Forecast: Average Hourly Earnings M/M: 0.2%

Consensus Forecast: Average Hourly Earnings Y/Y: 3.0%

Slowing payroll growth, reflecting expected declines tied to the GM strike, is the expectation for October nonfarm payrolls, at a consensus 93,000 versus a 136,000 increase in September. Manufacturing payrolls, where vehicle payrolls are counted, are expected to fall 50,000. The unemployment rate hit a 50-year low of 3.5 percent in September but is seen edging higher to 3.6 percent in October. Average hourly had been moving up but stalled in September, coming in unchanged on the month for a much lower-than-expected 2.9 percent year-on-year rate. For average hourly earnings in October, the consensus is moderate at a monthly 0.2 percent increase for yearly 3.0 percent growth.