Tomorrow (and over the weekend) we get a fairly broad cross-section of data from around the world.
This data could give us some insight into the real impact the second wave of covid could have on the economy.
October is an interesting month as many countries around the world started to reimpose lockdowns. But, with the experience from earlier in the year, there is a potential for the economic impact to be less.
Even if the number of cases is higher.
Retail outlets already have modified their establishments to slow the spread of the disease, meaning that they don’t have to take time to match new safety requirements.
Many have even transformed their business model to deal with the changing market dynamics (waiters becoming delivery). And many of the lockdown restrictions are taking into account the need to maintain retail sales functionality.
How the Markets are Shaping Up
So, it will be interesting to see how consumers behave under the new lockdowns.
Vaccines will be available to the broader population in the coming months, and major retail companies are starting to issue guidance for next year.
The two elements mean the stock markets might be willing to ignore bad news on the retail front. But better than anticipated retail sales could suggest that the long-feared inflation could be arriving soon.
And this would support more currency volatility.
The UK Carries On
First up the UK reports both consumer confidence and retail sales figures on the same day.
For this data, we want to focus on the monthly change in retail sales, since that gives us the freshest information. It also helps us understand the market reaction to the expectation of new anti-covid measures
Expectations are for monthly retail sales to have remained flat, compared to 1.5% growth prior. The UK’s retail sector remains at around 82% of pre-covid levels.
Australia Bounces Back
Despite increasing pressure from China, Australia’s retail sector seems to be getting back into its stride.
The country is moving into summer, and the state of Victoria is finally able to relax.
Projections are for retail sales to turn positive for the first time since August, coming in at 0.3% growth from -1.1% in September.
Canada’s Retail Sector Remains Stagnant
October is an important month for retailers in Canada because it includes autumn shopping and Thanksgiving.
However, despite that, expectations are for monthly retail sales to grow just 0.2% compared to 0.4% prior.
We could partially explain this by the return of lockdowns during the month. But more concerning for investors might be an increasing trend towards savings.
This could lead to further weakness in the CAD in the coming months.
What’s Going On in New Zealand?
The Kiwis report their retail sales only once a quarter, and expectations are for their quarterly retail sales to drop a further -15.9% compared to -14.6% prior.
Once again, we can attribute part of that to the lockdowns in August after cases were detected in Auckland. The market is likely to shrug the data off, as it’s rather old comparatively speaking.
That is, of course, unless there is a major beat over expectations.
