UK factory orders drop to a 3 month low

Yesterday we saw UK factory orders drop for the 3 months leading up to October – this is the steepest decline for three years which has come about due to a weaker global economy, a stronger pound, and reduced domestic demand. A drop in exports has had a particular impact on manufacturing – now hitting the worst level since April’13 – which is perhaps worrying for the UK’s bigger economic picture. It didn’t translate into wild swings for GBP, although we didn’t see any data of high importance out to swing the pound around either.

Today we’ll see Q3 GDP estimates released – the low inflation rate should be having a positive effect on consumer spending, although industrial output and PMI have been predicted to come in weak. It’s expected, though, that there won’t be any big drop-offs in PMI seen.

In the Eurozone, Germany’s business confidence dropped slightly from September to October to 108.2, but IFO numbers were up indicating, possibly, that the whole VW scandal is not having the major negative effect as initially thought. There won’t be much out today in terms of important data, but we’ll see more German data out tomorrow in the form of import prices and a consumer climate survey.

With the US dollar having shown considerable strength as recently as two months ago, what we’ve seen in the past few weeks is weakened non-farm payrolls data, slowing wage growth, and a drop in consumer spending – all of which have an impact on when an interest rate rise might be brought into effect.

Today sees the Fed sit down and meet but it seems very unlikely that there will be anything announced relating to a rate rise, certainly not before the end of the year. As with the UK, companies are also blaming the strong USD on a drop in exports so there may be pressure on the Fed to be careful with its decision making.