Third-Quarter GDP Growth Slows in South Korea
- The release this week of third-quarter GDP for South Korea showed a mixed picture of moderating economic growth. Exports slowed markedly, while growth in private consumption and gross fixed investment accelerated.
- The Bank of Korea, which met on monetary policy earlier this month, decided to refrain from another rate hike even though consumer price inflation jumped 1.1 percent in September and is running above the central bank’s comfort zone at 3.6 percent from a year ago.
ECB Policy Meeting • Thursday
The European Central Bank (ECB) is expected to leave interest rates unchanged on Thursday as the Eurozone economy continues to show signs of positive economic growth. We also do not expect the central bank to expand its quantitative easing scheme, but it will be interesting to see the reaction of the ECB if the U.S. Federal Reserve moves ahead with its own quantitative easing program when it meets next week.
Both the euro area and the U.S. economy are facing uncertain short- to medium-term environments that would probably call for more monetary policy measures. However, it is clear that the ECB’s stance remains more hawkish than the U.S. Federal Reserve stance, especially after the government bonds purchases it made earlier this year during the sovereign debt crisis. The tone of the ECB release will probably give some hints into the future.
Previous: 1.00% Wells Fargo: 1.00%
Consensus: 1.00%
Bank of England Policy Meeting • Thursday
The Bank of England (BoE) will announce its decision regarding interest rates on Thursday, and we also expect the bank to keep its policy rate unchanged at 0.50 percent. However, as is the case in the United States, the BoE will announce its target for asset purchases with markets estimating it to be unchanged at £200 billion.
The BoE knows that if it wants to stimulate growth in the coming quarters it will need to do so alone, because the government has decided to tighten fiscal policy significantly due to the unsustainable path that Britain’s fiscal accounts was following. In our view, it is much more likely that the BoE will eventually undertake a second round of quantitative easing than its counterpart in Frankfurt.
Previous: 0.50% Wells Fargo: 0.50%
Consensus: 0.50%
Germany Factory Orders • Friday
We suspect German factory orders remained relatively strong in September as the economy continues to surprise on the upside. The latest such development was this week’s unemployment report, which showed the ranks of the jobless declined for the 16th consecutive month. It is clear that Germany’s export sector continues to lead the way despite the recent appreciation of the euro. Strong economic growth in developing countries has helped to boost Germany’s capital goods suppliers.
We believe the German economy will continue to lead the way in the Eurozone even if the government also tries to reign in expenditures during 2011. However, we also believe that economic growth will be lower in 2011 than in 2010 as many of the Eurozone countries also reign in spending to bring down fiscal deficits and debt levels.
Previous: 3.4%
Consensus: 0.5% (Month-on-Month Change)
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