CZECHIA: Strong Q3 GDP Report Supports Expectations Of Rate Stability
Oct-30 11:11
Local sell-side analysts took note of expectation-busting preliminary Q3 GDP data released this morning, with most admitting that it might be another reason for the CNB to keep interest rates unchanged. The koruna is the best CE3 performer today. Czech FRAs moved higher across the curve, with the 3-month PRIBOR now sitting ~9bp below 12x15 FRAs, as the data cements expectations of medium-term interest-rate stability.
- Česká spořitelna note that cautious expectations were underpinned by weak data from Czech industry and data from over the summer indicating a slight moderation in consumer demand growth. However, they think that these developments were outweighed by a strong showing from the construction sector and other parts of the economy. They add an important caveat, noting that the construction-driven jump in inventories creates uncertainty, as it could be related to softening demand (with some companies producing to stock), which would result in slowed growth at the turn of the year. Still, they admit that the GDP report amplifies upside risk to their +2.3% Y/Y 2025 GDP forecast. In their view, the CNB will continue to keep rates on hold and monitor further developments for now.
- ČSOB write that 'the new government is taking over the economy in a very good phase of the economic cycle,' at a time when it is growing at the fastest pace since 1H22. They add that the outturn for 3Q25 was better than in the CNB's latest forecast, which the market had already deemed 'outdated and too optimistic'. Contrary to their expectations, ČSOB don't see any negative consequences of trade wars so far. Should these figures be confirmed, they will revise their growth forecasts for 2025 and 2026 slightly upwards to +2.5% Y/Y (from +2.1%) and to +2.0% Y/Y (from +1.8%), respectively. In their view, strong growth figures are another argument for the Bank Board not to cut interest rates any further.
- Komerční banka write that the sequential acceleration of growth was at odds with signals from monthly leading indicators showing a significant slowdown in the momentum of the Czech economy. They think that it is difficult to explain the scale of the surprise based on partial data and withhold judgement until the publication of a detailed report on November 28, where they see potential for downward revisions.
- Raiffeisenbank suspect that capital formation outperformed on the back of inventories rather than investment, while robust wage growth underpinned solid household spending. Based on the latest data, their nowcast indicates a 2025 GDP growth rate of +2.5% Y/Y versus +2.2% in their previous projection. In their view, the data is another reason why the CNB should remain very cautious in the coming months and they expect the central bank to stand pat on rates next week. The risks to their forecasts for GDP growth and CNB interest rates are skewed to the upside amid the prospect of eventual recovery in Germany.
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EUROPEAN INFLATION: German State-Level Details: Firmer Energy, Services
Sep-30 11:07
Looking a bit closer at this morning's German state level September CPI data, an energy acceleration to around -0.7% Y/Y (from -2.4% in August) stands out, bringing overall goods inflation to around 1.5-1.6% Y/Y (1.3% prior). Also services looks firmer than previously this time, at around 3.3% Y/Y (3.1% prior).
- Food inflation appears to have tapered off a little, to around 2.9% Y/Y in September (incl. non-alcoholic beverages, vs 3.2% prior).
- Within the services-heavy subcategories, the largest magnitude of change will likely be in education, we see the category around 3.9% Y/Y (from 5.1% prior, but note its low weighting in the CPI basket). Restaurants and hotels meanwhile seem to have accelerated, to around 3.9% - 4.0% (3.6% prior). Restaurants will see a VAT decrease in January in Germany.
- The mixed-weighting transport category meanwhile also accelerated, that comes on the back of the mentioned energy acceleration which is driven by base effects. We see transport at around 2.5% Y/Y in September (vs 1.4% prior).
LOOK AHEAD: Tuesday Data Calendar:Fed Speak, PMI, JOLTS, Cons Conf, House Prices
Sep-30 11:04
- US Data/Speaker Calendar (prior, estimate)
- 09/30 0900 Boston Fed Collins Council on Foreign Relations
- 09/30 0900 FHFA House Price Index MoM (-0.2%, -0.2%)
- 09/30 0900 S&P Cotality CS 20-City MoM (-0.25%, -0.20%), YoY (2.14%, 1.55%)
- 09/30 0945 MNI Chicago PMI (41.5, 43.3)
- 09/30 1000 JOLTS Job Openings (7.181M, 7.200M), Rate (4.3%, 4.2%)
- 09/30 1000 JOLTS Quits Level (3.208M, 3.165M), Rate (2.0%, --)
- 09/30 1000 JOLTS Layoffs Level (1.808M, 1.827M), Rate (1.1%, --)
- 09/30 1000 Conf. Board Consumer Confidence (97.4, 96.0)
- 09/30 1030 Dallas Fed Services Activity (6.8, --)
- 09/30 1130 US Tsy $85B 6W & $50B 52W bill auctions
- 09/30 1330 Chicago Fed Goolsbee Participates in a Q&A at Midwest Agriculture Co
- 09/30 1530 Chicago Fed Goolsbee on Fox Business
- 09/30 1910 Dallas Fed Logan moderated discussion
- Source: Bloomberg Finance L.P. / MNI
OUTLOOK: Price Signal Summary - WTI Pulls Back from Its Recent Highs
Sep-30 10:53
- On the commodity front, the trend condition in Gold is unchanged and a bull cycle remains in play. The yellow metal has started the week on a bullish note, trading to a fresh cycle high. This confirms a resumption of the primary uptrend. Note that MA studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on $3909.4, a 2.00 projection of the May 15 - Jun 16 - 30 price swing. On the downside, support to watch lies at $3646.3, the 20-day EMA. A pullback would be considered corrective.
- In the oil space, WTI futures have pulled back from their latest gains. The contract has recently breached $65.43, the Sep 2 high and this has potentially improved the S/T condition for bulls. However, the next key resistance is at $68.43, the Jul 30 high, where a break is required to signal scope for a stronger recovery. For bears, a clear reversal lower would refocus attention on key support at $60.85, the Aug 13 low. A break of this level would reinstate the downtrend.
