Big Picture: The US government shutdown has reduced the daily data flow, but the news flow about the fiscal situation has made up for it. Polarisation in US politics is worrying and it cannot be completely ruled out that negotiators fail to reach an agreement. Expectations at the end of last week of an imminent deal for a temporary extension of the debt ceiling were dashed as talks broke down. While there is some nervousness in financial markets, most participants judge that an eleventh hour solution will be reached. We are no different.
US: There were some signs that the shutdown is starting to have an effect on the economy. Initial jobless claims unexpectedly rose by 66K to 374K in the week ending October 5. About half of the rise could be explained by a backlog of claims created by computer issues, but about 15K claims were related to the government shutdown.
Eurozone: Industrial production looks set to ease in Q3 after it accelerated in Q2. However, we expect it to pick up again in the coming months, on the back of a stronger global economy and gradually improving domestic conditions. The overall pace of economic recovery is likely to be slow.
Asia: China’s export data for September looked weak, but this was the result of base effects since regional over-reporting of exports started at this time last year. Export growth to G3 countries continued to show strong external demand. Meanwhile, relatively healthy import growth suggests that domestic demand remains firm.