Daily Economic Outlook: 2nd November 2015

Manufacturing PMI data for October will provide an update on industrial activity in Europe. With world trade sluggish, the sector seems to be under pressure everywhere. The 'flash' indicators, however, suggested that manufacturing activity in the euro area was relatively resilient in October and the final figures are expected to confirm this picture. In the UK, the slowdown looks more abrupt and the October CBI survey showed a particularly sharp drop. Consequently, another fall in the headline index is expected to 50.7, says Lloyds Bank.

U.S. manufacturing also looks to be under pressure due to the negative impact of a strong dollar and weak external demand. While Friday's stronger than expected Milwaukee ISM and Chicago PMI both point to some upside risk for today's October ISM manufacturing release, this is still likely to show further weakness and may only just stay above the 50 expansion/contraction level, added Lloyds Bank.

Markets seem to be attaching only a 40% probability to an interest rate cut at the RBA meeting tomorrow morning, despite last week's softer than expected Q3 CPI. However, as meetings that follow the release of inflation data and precede the RBA's Statement on Monetary Policy (due Friday) have often been chosen as suitable occasions to change policy, tomorrow may still be seen by the RBA as a suitable time to move before their summer break.