Introduction

The week's economic news is more positive than negative, suggesting on net that the global economy has settled into a low but steady rate of growth. Such a result would be good news for everyone especially central bankers who, amid efforts to stimulate demand, have been losing breathing space in their policy options. We'll first look at one central bank where rates may no longer be going down, another where rates have yet to go down, and a third where rates have been down for a very long time.

The economy

Monetary policy

In their third incremental rate cut in a row and despite a relatively upbeat economic assessment, the Federal Reserve as expected cut its policy rate on Wednesday by 25 basis points to a range of 1.50 percent to 1.75 percent with an implied midpoint of 1.625 percent. But the chances for further rate cuts appear to be limited as Jerome Powell, speaking at his post-meeting press conference, said "a material reassessment of our outlook" is what would be needed for the Fed to next change rates, whether up or down. The Fed chair hinted but would not directly confirm that as long as economic growth remains moderate and is accompanied by strength in the jobs market and roughly 2 percent inflation, Fed policy from this point on is very likely to be neutral.

And the statement's economic assessment underscores this sense of neutrality, specifically a lack of urgency for further cuts. The US labor market was once again described as strong and economic growth as moderate and with household spending once again said to be rising at a "strong pace". Business investment has been the sore point but the October assessment was no worse than in September, once again described as "weak" with exports, another trouble spot, once again also described as "weak". Inflation is also a trouble spot, once again said to be "running below" target. But it's weakness in business investment, reflecting slowing global demand for US exports, that's been at the heart of the Fed's efforts to stimulate growth, that and also the need to lift inflation back to target. In a special note, the Fed made no new changes to its repo programs or balance sheet plans after announcing a move earlier in October to add temporary liquidity to stem what the Fed describes as temporary dislocations in the money markets.

Unlike the Fed, the Bank of Canada is one of the few central banks that have yet to lower rates. And in line with expectations, the target for the BoC's benchmark overnight rate held unchanged Wednesday at 1.75 percent. The bank said in its statement that the outlook for the global economy has weakened further due to ongoing trade conflicts and uncertainty which have restrained business investment, trade, and global growth. The bank expects Canadian growth to slow in the second half of the year to a rate below potential, reflecting the uncertainty associated with trade conflicts, continuing adjustment in the energy sector, and the unwinding of temporary factors that boosted growth in the second quarter.

Yet there was definitely an upbeat theme in the report as the bank, despite likely contraction in business investment and exports, noted that government spending and lower borrowing rates are supporting domestic demand, with activity in the services sector remaining robust. Employment is also showing continuing strength and wage growth is picking up which the bank said should help consumer spending which has been choppy. The bank also noted that housing activity is turning around, helped by lower mortgage rates. The Bank projects real GDP will grow by 1.5 percent this year, 1.7 percent in 2020 and 1.8 percent in 2021. Measures of inflation are all around 2 percent, and the BoC expects the CPI to dip temporarily in 2020 as the effect of a previous spike in energy prices fades.

One bank that continues to be plagued by lack of improvement in consumer inflation is, of course, the Bank of Japan which, also as expected, left monetary policy settings unchanged at their latest meeting. As it has been since early 2016, the BoJ's short-term policy rate for excess reserves remains at minus 0.1 percent while the target level for the long-term 10-year yield remains at around zero percent. The BoJ's policy framework also involves adjustments to its direct purchases of government bonds in order to keep the Japanese 10-year yield close to its target level of zero percent. For now, officials say Y80 trillion of purchases annually are consistent with meeting this target.

The question for the BoJ is whether prior improvement in inflation is being lost, a risk that isn't increasing but is still be watched with special caution. Officials have promised to ease policy further "without hesitation" if they conclude that inflation is going down. And the bank did downgrade its forecasts for core inflation from 1.0 percent to 0.7 percent for the 2019 fiscal year ending in March, from 1.3 percent to 1.1 percent for fiscal year 2020, and from 1.6 percent to 1.5 percent for 2021. And though the bank didn't change rates, they did change their forward guidance, from holding policy rates at current levels until early 2020 to the possibility of lowering rates. Speaking at his press conference, Governor Haruhiko Kuroda said the bank has a range of options to pursue if officials decide that further policy easing is required, including lowering short-term or long-term rates, expanding asset purchases, and accelerating the growth of the money supply.

Gross domestic product

Economic reports, such as Eurozone GDP, were steady in the week and sometimes solid as we'll see with consumer spending in the US or one of the manufacturing reports from China. And though subdued in the third quarter, preliminary flash Eurozone GDP at least didn't deteriorate much. The first estimate for the third quarter showed a second successive and very modest 0.2 percent quarterly gain in total output, a tick above the market consensus but still equaling the worst performance since it last contracted back at the start of 2013. Annual workday adjusted growth, as tracked in the accompanying graph, was 1.1 percent, down from 1.2 percent in the previous period. No other details are available in the first estimate although national data already released showed quarterly growth holding steady in Spain (0.4 percent), France (0.3 percent) and also Italy (0.1 percent). German GDP, which in contrast may have weakened, will not be available until November 11.

The first estimate of third-quarter GDP was also released in the US and here the news points to tangible growth. GDP came in at 1.9 percent and near the top end of expectations, but the really good news is that strength was squarely centered in the most important component, and that's real consumer spending which rose at a 2.9 percent pace despite a very tough comparison with the second quarter's unusually strong 4.6 percent showing. And within consumer spending, durable goods continued to post very sharp growth at a 7.6 percent rate versus 13.0 percent in the second quarter with both quarters showing especially strong results for recreational goods & vehicles. Strength in durables speaks to discretionary strength at the consumer level. Residential investment was another important positive in the third quarter report, rising at a 5.1 percent rate and offering the first positive contribution to GDP since the fourth quarter of 2017. Government spending was also a plus, rising at a 2.0 percent rate which, however, was down from 4.8 percent in the second quarter.

The report's big negative was a second straight quarter of contraction for nonresidential fixed investment, falling 3.0 percent after the prior quarter's decline of 1.0 percent. Nonresidential structures showed special weakness with equipment also in contraction. The Fed, of course, has signaled special concern over the outlook for US manufacturing and specifically the outlook for related business investment. But it's consumer spending and its contribution of 1.93 percentage points (basically the quarter's entire growth rate) that headlined third-quarter GDP, pointing to fundamental momentum for the economy and ultimately reflecting the strength of the US labor market.

International trade

Net exports were a small negative for the US in the third quarter, pulling GDP down fractionally despite a turn higher for exports. But net exports measure the balance of imports and exports and can be positive for GDP even when both are contracting. And such positive news came from a sharp narrowing in the US's monthly goods deficit in September to $70.4 billion, improvement that masks, however, the bad news which is that exports and imports both fell sharply in an indication of worldwide slowing. Exports of US goods dropped 1.6 percent in September for year-on-year contraction of 3.0 percent, showing an oversized 12.6 percent monthly decline for foods, feeds & beverages that underscores questions over Chinese and US cooperation. Exports of US autos were also sharply lower, down 7.2 on the month in what was perhaps tied in part to the GM strike which, now ended, began mid-month September. Imports fell 2.3 percent on the month with this year-on-year decline at a steep 4.6 percent. Here consumer goods fell 5.0 percent in the month and with capital goods down 2.3 percent and vehicles down 3.5 percent in what are all steep declines. Declining imports speak of slowing US demand and highlight the risk that trade issues may continue to drag on global growth, perhaps at an accelerating rate. Note that bilateral country data aren't broken out in the advance goods release but will be posted in the coming week's trade report that will include services.

Purchasing managers indexes

Like many countries, economic news out of China has been mixed with GDP slowing but retail sales and industrial production improving. And the latest manufacturing report from Markit Economics points to further improvement for Chinese industrial production, as the PMI advanced from 51.4 in September to 51.7 in October, above the consensus forecast for 51.0. This was the fourth consecutive increase for the index and lifts it to its highest level since February 2017. The sample reported strengthening for both production and new orders, the latter growing at their fastest pace in nearly seven years. New export orders were also up, rising for the first time in five months and at the fastest pace since February last year, suggesting that progress in US-China trade talks, however up and down, may be providing a boost to external demand. And though payrolls were cut at a sharper rate, the survey's measure of business confidence improved in October. Yet in keeping with the theme of mixed results, the gains contrast with the official CFLP manufacturing PMI released earlier in the week that showed a drop in its headline index from 49.8 in September to 49.3 in October.

Retail sales

There's an anomaly in Japanese data that looks to have given the third quarter a lift at the expense of the fourth quarter. October saw an increase in consumption tax rates from 8 percent to 10 percent that was broad-based across categories, this pulled sales forward into September making for the very big jump as seen in the graph. Retail sales in Japan rose 9.1 percent on the year in September, picking up strongly from an increase of 1.8 percent in August and well above the consensus forecast for growth of 6.9 percent. On the month, retail sales advanced 7.1 percent after increasing 4.6 percent in August. September's growth was driven by motor vehicles where yearly growth surged to 16.9 percent from 2.2 percent. Food and beverage sales rose 1.1 percent on the year versus August's 0.7 percent increase with contraction in fuel sales narrowing to 0.4 percent from 3.6 percent. Household spending data for September are scheduled for publication in the coming week with third-quarter GDP scheduled the week after that.

Another anomaly affecting a nation's data, this time the UK, has been the on-and-off deadlines for Brexit. According to the CBI Distributive Trade survey, annual retail sales growth was negative for a sixth consecutive month in October. At minus 10 percent, the balance of respondents reporting weaker volumes than a year ago was actually on the strong side of market expectations and above September's minus 16 percent but still indicative of underlying weakness. Retailers expect sales to be broadly stable in November though the outlook remains problematic with orders placed on suppliers (at minus 4 percent) again negative and expectations for next month (minus 22 percent) even worse. Indeed, sales for the time of year were slightly down from their previous reading and are also seen poor for November. October's survey was notable for a record spike in stocks, presumably reflecting what was the looming Brexit deadline of October 31 and related concerns over possible shortages. Such uncertainty in the run up to the peak Christmas holiday period came of course at an inconvenient time for retailers, and the week's news of a new January 31 Brexit deadline, with inventories already swollen, could well add to downside risks for November.

Inflation

The week wound up Friday with the US employment report where, solid growth or not, inflation pressures are hard to find in results that do not point to any unaccommodative shift for Federal Reserve policy. GM strike or not, nonfarm payrolls rose 128,000 which was on the high side of expectations with underlying strength firmly underscored by large upward revisions to the two prior months totaling a net 95,000. Other indications of just how strong the labor market is come from the unemployment rate, up 1 notch but at a very low 3.6 percent which is just off September's 50-year low at 3.5 percent, and the participation rate which keeps climbing, up another tenth to 63.3 percent. Yet this strength raises the question whether the labor market has enough available capacity for extending job growth in the months ahead. The answer, judging by wage pressures, would appear to be yes as average hourly earnings managed only a 0.2 percent rise following no change in the prior month. Year-on-year, earnings growth came in at 3.0 percent which, along with September's 3.0 percent, are the two lowest readings since September last year. The Fed's central price gauges, on which they set their target goals, were also released in the week, and core PCE prices missed monthly expectations at no change though the year-on-year rate did make the consensus at 1.7 percent which, however, is down 1 tenth from August and farther afield from the Federal Reserve's 2 percent target. The overall PCE rate, which includes food and energy, was also unchanged on the month and also fell 1 tenth on the year, to 1.3 percent. Turning back to the employment report, manufacturing payrolls, reflecting the effects of the now settled GM strike, fell 36,000 in a very steep decline that looks, however, to be fully reversed in the November employment report.

Markets: Good data or bad data, stock markets moving higher

Grim economic news from Hong Kong could not hold back the Hang Seng, rising 1.6 percent in the week to lift its gain year to date to a surprisingly resilient 4.9 percent and its gain from this time last year to a very respectable 6.6 percent. But the economics were definitely grim as Financial Secretary Paul Chan – citing weak demand from China, trade tensions, and civil unrest – warned everyone nearly a week in advance that GDP would contract for the second straight quarter and very sharply at that. On Thursday the results for the third quarter were in, at minus 3.2 percent on the quarter and minus 2.9 percent on the year. But gaining 0.9 percent on the day, the Hang Seng would not be held back not even by warnings from officials that downward pressures on the Hong Kong economy are likely to persist. Another stock market resilient to bad economic news was the Swiss Market Index, rising 0.5 percent on the week and 0.3 percent on Friday despite news of a third straight monthly dip for retail sales and an unexpected decline in consumer prices that takes the yearly CPI into the negative column at minus 0.3 percent. Here, however, the stock market's strength could well reflect new talk of forthcoming stimulus from the Swiss National Bank. The biggest gainer was India's Bombay Sensex, up 2.8 percent in the week to lift its gain to 11.4 percent year to date and 16.7 percent on the year. Economic news was light from India in the week though the manufacturing PMI was posted on Friday, showing a sizable 8 tenths downtick to a two-year low 50.6 amid slowdowns in orders, output and employment.

The bottom line

Jerome Powell at his press conference described the global slowdown as "synchronized", the result he said of weakness in international trade. And though trade data are weak, it's possible that the worst effects of tariff actions, mitigated by a year of rate cuts across many central banks, may already have come and gone. Powell said risks to the US economy have, in fact, "subsided" since the last FOMC meeting in September, underscoring "strength" and "resilience" at the household level, whether for employment or spending. These assessments, though for the US, are also perhaps reasonable assessments right now for the global economy as a whole.

**Jeremy Hawkins and Brian Jackson contributed to this article

Week of November 4 to November 8

Big news kicks off on Tuesday with the Reserve Bank of Australia, a bank that has been cutting rates aggressively all year and where another cut, though not expected, would add to the global wave of central-bank stimulus. Key economic data include German manufacturers' orders on Wednesday which began their breakdown this time last year and German industrial production on Thursday, where breakdown subsequently followed. Eurozone retail sales on Wednesday and Japanese household spending on Friday will offer regional updates on the consumer with Canada, after last week's Bank of Canada decision not to cut rates, to post labour market data on Friday. Other news to watch will be ISM non-manufacturing on Tuesday, in a US report that broke down badly in September, and the Bank of England's announcement on Thursday from a bank where Brexit uncertainty has limited policy scope. Chinese trade data, which like US trade data have been in contraction for both imports and exports, will be an early Friday highlight and if you're awake late Friday US time, you can pick up Chinese CPI and PPI data that will be released Saturday morning local time.

Australian Retail Sales for September (Sun 19:30 EST; Mon 00:30 GMT; Mon 11:30 AEDT)

Consensus Forecast, Month-to-Month: 0.4%

Retail sales in Australia are expected to increase 0.4 percent on the month in September following wide weakness in August that saw monthly sales down 0.1 percent for yearly growth of 2.9 percent.

UK: PMI Construction for October (Mon 04:30 EST; Mon 09:30 GMT)

Consensus Forecast: 44.0

Pulled down by Brexit uncertainty and special weakness in commercial building, the construction PMI, at a lower-than-expected 43.3 in September, is at 10-year lows. For October the consensus is 44.0.

Reserve Bank of Australia Announcement for November (Mon 20:30 EST; Tue 03:30 GMT; Tue 14:30 AEDT)

Consensus Forecast, Change: 0 basis points

Consensus Forecast, Level: 0.75%

After cutting its rate in October for the third time this year, the Reserve Bank of Australia is expected to hold its policy rate steady at 0.75 percent. There is still slack in Australia's labor market though the closer the policy rate gets to zero, the more limited policy flexibility becomes.

Canadian Merchandise Trade for September (Tue 08:30 EST; Tue 13:30 GMT)

Consensus Forecast: -C$0.6 billion

A C$0.6 billion deficit is expected for Canadian merchandise trade in September versus a slightly less-than-expected C$1.0 billion deficit in August.  Both imports, boosted by gold, and exports, driven by energy, improved in August.

US International Trade Balance for September (Tue 08:30 EST; Tue 13:30 GMT)

Consensus Forecast: -$52.5 billion

Narrowing is the call for September's international trade deficit, at a consensus $52.5 billion versus $54.9 billion in August. Advance data for the goods portion of September's report showed a less-than-expected deficit of $70.4 billion for a $2.7 billion monthly improvement from August. Yet improvement in the goods deficit masked deep September contraction for both exports and especially imports.

US ISM Non-Manufacturing Index for October (Tue 10:00 EST; Tue 14:00 GMT)

Consensus Forecast: 53.5

Following September's abrupt slowing to an unexpected three-year low of 52.6, forecasters see improved results for October to a 53.5 consensus. Nearly across the board slowing was evident in September.

German Manufacturers' Orders for September (Wed 02:00 EST; Wed 07:00 GMT; Wed 08:00 CET)

Consensus Forecast, Month-to-Month: 0.2%

Orders have been on a long decline for German manufacturers but the consensus for September is pointing to a small but welcome gain, at 0.2 percent on the month. August's results missed expectations with a monthly decline of 0.6 percent and a yearly decline of 6.6 percent.

Eurozone Retail Sales for September (Thu 05:00 EST; Thu 10:00 GMT; Thu 11:00 CET)

Consensus Forecast, Month-to-Month: 0.2%

Eurozone retail sales rose an as-expected 0.3 percent in an August report that showed slight improvement. A 0.2 increase of percent is the call for August.

Australian Merchandise Trade for September (Wed 19:30 EST; Thu 00:30 GMT; Thu 11:30 AEDT)

Consensus Forecast:  A$5.0 billion

Imports fell back less sharply than exports, making for a narrower-than-expected Australian trade surplus in August, at A$5.9 billion. The consensus for September is a surplus of A$5.0 billion.

German Industrial Production for September (Thu 02:00 EST; Thu 07:00 GMT; Thu 08:00 CET)

Consensus Forecast, Month-to-Month: -0.7%

Up 0.3 percent, August was a month of unexpected improvement for German industrial production though the yearly rate remained depressed and unchanged at minus 4.0 percent. Manufacturers' orders have been soft which doesn't point to further improvement for industrial production in September where the monthly consensus is a 0.7 percent decrease.

Bank of England Announcement for November (Thu 07:00 EST; Thu 12:00 GMT)

Consensus Forecast, Change: 0 basis points

Consensus Forecast, Level: 0.75%

Consensus Forecast: Asset Purchase Level: £445 billion

No change is once again the expectation for Bank of England monetary policy which, despite a standing bias toward tightening, is locked in place by not only Brexit but also now by the prospect of a general election in December not to mention general slowing in the global economy. Bank Rate is expected to stay at 0.75 percent and the QE ceiling at £445 billion including gilt purchases of £435 billion.

Japanese Household Spending for September (Thu 18:30 EST; Thu 23:30 GMT; Fri 08:30 JST)

Consensus Forecast, Month-to-Month: 3.7%

Pulled higher by forward buying ahead of a consumption tax increase, Japanese household spending is expected to increase 3.7 percent in September versus a 2.4 percent rise in August that was 4 tenths below the consensus.

French Industrial Production for September (Fri 02:45 EST; Fri 07:45 GMT; Fri 08:45 CET)

Consensus Forecast, Month-to-Month: 0.4%

Industrial production is expected to increase a monthly 0.4 percent in September after falling 0.9 percent in August. A drop in machinery production pulled down the manufacturing component in the last report, reflected in August's minus 1.4 percent overall yearly rate which was the weakest of the year.

Canadian Labour Force Survey for October (Fri 08:30 EST; Fri 13:30 GMT)

Consensus Forecast: 10,000

September employment rose an unexpectedly strong 53,700 and the unemployment rate fell to an unexpectedly low 5.5 percent. For October the consensus is looking for a 10,000 payroll increase and an unemployment rate one notch higher at 5.6 percent.

Chinese Merchandise Trade Balance for October (Friday CST: Release Time Not Set)

Consensus Forecast: $43.0 billion

The October consensus for the merchandise trade balance is a surplus of US$43.0 billion following a $39.65 billion surplus in September. Year-on-year imports and exports have both been in contraction, at minus 3.2 percent in US dollar terms in September and minus 8.5 percent for imports.

Chinese PPI for October (Fri 20:30 EST; Sat 01:30 GMT; Sat 09:30 CST)

Year-over-Year, Consensus Forecast: -1.5%

Producer prices fell a yearly and as-expected 1.2 percent in September. For October, forecasters are calling for 1.5 percent contraction.

Chinese CPI for October (Fri 20:30 EST; Sat 01:30 GMT; Sat 09:30 CST)

Consensus Forecast, Year-over-Year: 2.8%

Disruptions in pork supply have been driving Chinese consumer prices higher. The year-on-year consensus forecast for October consumer prices is 2.8 percent, down from September's higher-than-expected 3.0 percent.