Market Review – October 2022


Richard Wallis
Head of Research and Investment


Market Overview

CR = Capital return; LC = Local currency
Source: Lipper for Investment Management
Past performance is not a reliable indicator of future performance

UK markets rose in October, with the FTSE 250 outperforming the FTSE 100. Despite the concerns over the British economy, the more domestically-focused FTSE 250 benefited to a greater extent from the reversal of most of the measures in the Mini-Budget and the appointment of the Rishi Sunak as Prime Minister. A recovery in sterling weighed on the overall gains for the FTSE 100.

US indices posted very strong gains in October, as shown by the S&P 500, with sentiment boosted in particular in the second half of the month by hopes that the Federal Reserve will ease its aggressive interest rate rises after its November meeting. There was also support from a broadly positive earnings season, despite disappointing updates from a number of large technology companies.

European markets, as demonstrated by the broad FTSE World Europe ex UK Index, also recorded large gains, despite record high prices and slowing growth, with corporate earnings again broadly better than expected. There was also a gain for the Japanese Nikkei 225 Index, helped by an anticipated slowing of US interest rate rises.

Sharp sell-offs in China and Hong Kong weighed heavily on Asian markets, with the broad MSCI Asia ex Japan Index suffering a large decline. Sentiment towards China was negatively impacted by Xi Jinping winning a third term as leader in the 20th Party Congress, which saw no real changes to economic policy or a relaxing of the zero-Covid approach.

Global Emerging Markets underperformed developed markets, as shown by the fall in the broad MSCI Emerging Market Index, with the weakness in China again a key factor. As a result, Emerging Asia was the poorest performer, with Latin America producing the strongest returns, led by Mexico and Brazil.

October was a positive month for fixed income assets, as the turmoil following the Mini-Budget subsided following the U-turn on most of the fiscal measures. UK gilts (FTSE Actuaries UK Conventional Gilts Index) recorded their best monthly performance since January 2020 and whilst yields remained high, they were lower than in September (fixed income prices and yields have an inverse relationship). UK corporate bonds also performed well as they finished October with gains, benefiting from the expectation that the government would take a more cautious fiscal approach.

This update is intended to be for information only and should not be taken as financial advice.

Short-term Key Dates

  • 2nd November – US Federal Reserve Interest Rate Decision
  • 3rd November – Bank of England Interest Rate Decision
  • 4th November – US Non-Farm Payrolls for October
  • 10th November – US Inflation for October
  • 11th November – UK GDP 3rd Quarter Preliminary Estimate
  • 11th November – UK Monthly GDP for September
  • 14th November – Japan GDP 3rd Quarter Preliminary Estimate
  • 15th November – UK Labour Market Statistics
  • 15th November – Eurozone GDP 3rd Quarter Second Estimate
  • 16th November – UK Consumer Price Indices (Inflation) for October
  • 17th November – UK Fiscal Statement
  • 18th November – UK Retail Sales Data for October
  • 22nd November – UK Public Sector Finances for October
  • 23rd November – UK Flash PMIs for November
  • 25th November – UK Gfk Consumer Confidence for November
  • 25th November – Germany GDP 3rd Quarter Final Estimate
  • 30th November – France GDP 3rd Quarter Final Estimate
  • 30th November – US GDP 3rd Quarter Second Estimate
  • 2nd December – US Non-Farm Payrolls for November
  • 7th December – Japan GDP 3rd Quarter Final Estimate
  • 7th December – Eurozone GDP 3rd Quarter Third Estimate
  • 12th December – UK Monthly GDP for October
  • 13th December – UK Labour Market Statistics
  • 13th December – US Inflation for November
  • 14th December – UK Consumer Price Indices (Inflation) for November
  • 14th December – US Federal Reserve Interest Rate Decision
  • 15th December – Bank of England Interest Rate Decision
  • 15th December – European Central Bank Interest Rate Decision
  • 16th December – UK GfK Consumer Confidence for December
  • 16th December – UK Retail Sales Data for November
  • 16th December – UK Flash PMIs for December



October was a mixed month for global equity markets, with developed markets producing strong gains, but there were losses for Asian and Global Emerging Markets. Corporate earnings updates broadly supported sentiment in developed markets, as did hopes for an easing in US interest rates after the November meeting. Weakness in Chinese equities weighed on Asian and Global Emerging Markets. UK fixed income assets gained, helped by the reversal of the fiscal policies in the Mini-Budget and the appointment of Rishi Sunak as Prime Minister.

Economic Overview      


Bank of England

The fall-out from the Mini-Budget led the Bank of England (BoE) to continue to try and calm investors in the first half of October, as it warned of a “material risk” to financial stability. The BoE bought further government bonds to stabilise their prices and prevent a sell-off that could put some pension funds at risk of collapse. The turmoil in the gilt market had forced some pension funds to sell bonds due to concerns over their solvency, which put further pressure on prices and threatened to create a downward spiral. In addition, the emergency programme was widened to include inflation-linked bonds on 11 October. The BoE terminated these temporary bond purchases on 14 October as planned, whilst stating that these operations had enabled a significant increase in the resilience of the sector.

In addition, the BoE said the first gilt sale operation would now take place on 1 November. Furthermore, for the fourth quarter of this year the gilt sales will be distributed evenly across the short and medium maturity sectors only, with the maturity split for subsequent quarters being considered ahead of the first quarter of 2023.

Political turmoil continues

As the backlash continued over the Mini-Budget, Prime Minister Liz Truss sacked Kwasi Kwarteng, replacing him with former foreign and health secretary Jeremy Hunt. In addition, having already reversed the decision to scrap the top rate of income tax, the Prime Minister announced a further U-turn as she said the planned rise in corporation tax would now go ahead. The Prime Minister told a news conference that she accepted she had gone “further and faster” than markets had been expecting, whilst adding “We need to act now to reassure the markets of our fiscal discipline”. The immediate reaction to these announcements on 14 October was for the cost of borrowing to increase alongside a weakening in sterling, with markets already expecting this announcement and had priced-in the U-turn.

This was followed on 20 October by Prime Minister Liz Truss announcing her resignation after only 44 days in office, triggering a second leadership election. Rishi Sunak won the leadership contest to become Britain’s first Asian Prime Minister and the youngest for more than 200 years after his rivals withdrew before the deadline. Jeremy Hunt remains as Chancellor, announcing the new economic plan on the UK’s tax and spending, which was upgraded to a full Autumn Statement, would be delayed until 17 November, so that it could be based on the “most accurate” economic forecasts. It will also be accompanied by a report from the Office for Budgetary Responsibility, which will provide independent forecasts on the impact of the plans on growth and spending.

Economic Growth

The UK economy unexpectedly contracted in August, as weakness in manufacturing and maintenance work in North Sea oil and gas fields weighed on activity. The Office for National Statistics (ONS) said the UK economy contracted by 0.3% in August, below the forecasted zero growth. In addition, July’s growth was revised lower from 0.2% to 0.1%. Manufacturing declined by 1.6% from July, whilst there was an 8.2% fall in the mining and quarrying sector due to the maintenance in the North Sea. The ONS also said that many consumer-facing services struggled in August, with retail, hairdressers and hotels all faring relatively poorly. The construction sector was the only one of the three main parts of the economy to grow in August, expanding by 0.4%.

Private Sector Survey Data

In more timely data on the UK economy, a closely watched survey showed that the downturn in Britain’s private sector worsened in October. The S&P Global flash composite Purchasing Managers’ Index (PMI) measures activity in the services sector and manufacturing and is an estimate for the full month as it is provided before the end of the period and as such, is not based on the entire range of survey responses. The flash composite PMI fell from its final reading of 49.1 in September to 47.2 in October, a 21-month low and further below the 50-mark separating expansion from contraction. Activity across the services sector declined for the time in 20-months, as squeezed household budgets, concerns over recession and delayed business investment decisions all contributed to lower output. Manufacturing firms continued to see output contract, although the rate of decline did ease, with many businesses noting supply shortages were still weighing on production volumes, alongside a general slowdown in demand.

The survey data showed new orders fell at a quicker pace than business activity volumes, with firms highlighting a lack of new work to replace completed projects as well as fewer sales queries, which was broadly linked to the deteriorating economic outlook. Overall, business levels fell at their sharpest rate since January 2021, with manufacturers experiencing a particularly steep fall in new work. Input price inflation eased for the fourth time in five months, with the rise in operating expenses the least marked for 13-months, although overall cost pressures were still stronger than at any time in the two decades prior to the pandemic.

Service sector businesses noted a particularly strong rate of cost inflation, driven by surging energy bills and staff wages. Average prices charged by private sector firms increased sharply, although the rate eased to its lowest since August 2021, with some businesses noting competitive pressures and weak demand had acted as constraints on pricing power. The flash services PMI fell from 50.0 in September to 47.5 in September, a 21-month low, whilst the flash manufacturing PMI declined from 48.4 to 45.8, a 29-month low. Manufacturing output rose, but is still showing a sharp decline in production, increasing from 44.2 to 45.6, a three-month high.

Government Borrowing

British government borrowing, which is the difference between spending and tax income, was higher than expected in September. The ONS said public sector borrowing excluding state-owned banks was £20.0 billion in September, above the forecasted £17.1 billion. The ONS said it was the second highest borrowing in the month of September since records began in 1993. The data showed inflation continued to have a large impact on government debt interest payments, with these reaching £7.7 billion in September, the highest figure for this month since records began in April 1997. For the first six months of the 2022/23 financial year (April to September), borrowing stood at £72.5 billion, which is 26% lower than the same period last year but double the level before the pandemic in 2019.

Unemployment & Labour Market Statistics

British unemployment fell by more than expected in the three months to August as it dropped to 3.5%, below the forecasted 3.6% reading. There was a record increase in the number of people leaving the labour market in the three months to August, with the rise of 252,000 the largest since records began in 1971. Part of the reason behind the fall in the number of people looking for work is long-term illness. The number of vacancies in the three months to September fell to its lowest level since late-2021, but the ONS said the ratio of unemployed people to vacancies declined to a record low.

The number of people in employment fell by 109,000 in the three-months ending August, which was less than the forecasted 155,000 drop. The ONS said growth in regular pay excluding bonuses rose by 5.4%, the highest rate since the three months to August 2021 but taking into account inflation it fell by 2.9%, which was slightly smaller than the biggest ever fall although it is still among the largest since records began in 2001. Employees’ total pay, which includes bonuses, increased by 6% but in real terms after allowing for inflation it fell by 2.4%.


The annual rate of UK inflation, as measured by the Consumer Price Index (CPI), rose in September by the biggest amount since 1980. The ONS said that CPI rose from 9.9% in August to 10.1% in September, slightly ahead of the forecasted smaller increase to 10%. Food and non-alcoholic beverages prices were the largest driver of inflation in September as they surged by 14.5%, the biggest increase since April 1980 according to historical modelled estimates of CPI. The price of cereals, milk and cheese were all notably higher. The ONS said energy bills, transport costs and hotel prices also rose. Core CPI, which excludes volatile food and energy prices, rose to a new 30-year high of 6.5%. September’s inflation figures are usually used to calculate next April’s rise in state pensions and some benefits, but it was unclear at the time of the data release as to whether the government still intends to stick to this policy.

Retail Sales

British retail sales fell by much more than expected in September, as households sharply lowered their spending amid rising prices and the cost of living crisis. Retail sales volumes fell 1.4% in September, well below the forecasted smaller fall of 0.5%. The overall figures were likely impacted by the one-off bank holiday when many shops were closed to mark the funeral of Queen Elizabeth, although the ONS said it was unable to estimate the extent of the impact on the figures. Food store sales fell by 1.8%, whilst non-store retailing (predominantly online) declined 3%. Non-food stores fell 0.6%, with fuel volumes 1.3% lower. In annual terms, total sales volumes fell 6.9%, the biggest fall since May 2020.

Consumer Confidence

Research firm GfK said their Consumer Confidence Index remained close to the record low level seen in September. The index rose from -49 in September to -47 in October, which was above the forecasted drop to a new record low of -52. The reading was based on the period after Prime Minister Liz Truss agreed to the first of several U-turns on tax policy, but before her resignation. GfK said households were not only concerned over high energy and food prices, but also of the prospects of further interest rate rises increasing mortgage costs. These concerns were reflected in the fall in the measure of consumers’ willingness to make expensive purchases.


Economic Growth

Preliminary data showed US economic growth rebounded by more than expected in the third quarter. The Commerce Department’s advance estimate showed the US economy expanded by an annualised rate of 2.6% in the third quarter, which was ahead of the forecasted 2.4% growth and follows two consecutive quarters of contraction. The trade deficit narrowed sharply as slowing demand weighed on imports, whilst exports rose during the quarter, with the smaller trade gap adding nearly 2.8% to economic growth, the most since the third quarter of 1980.

Final sales to private domestic purchasers, which excludes trade, inventories and government spending, rose by only 0.1% indicating that higher borrowing costs were starting to weigh on demand. This was the slowest increase in this measure of domestic demand since the second quarter of 2020 and follows a 0.5% rise in the second quarter. Business inventories subtracted 0.7% from growth, although this was a lower negative contribution than in the previous quarter. Residential investment fell for the sixth consecutive quarter, with the housing market being impacted by soaring mortgage rates, although non-residential investment was higher than the previous period.

Private Sector Survey Data

S&P Global said the US private sector suffered a further downturn in October, with challenging demand conditions and inflation concerns weighing on activity. The flash composite PMI fell from 49.5 in September to 47.3 in October, a two-month low whilst with the exception of the initial pandemic period, the rate of decrease was the second fastest since 2009. New orders fell back into contraction and although the decrease was only marginal, it was broad-based as both manufacturers and service companies reported weaker client demand. Goods producers were a key driver of the decline, with companies noting the impact of inflation and stockbuilding earlier in the year on customer demand.

A reduction in foreign customer demand was also indicated, with the strong dollar and challenging economic conditions in key export markets reportedly weighing on orders. The rate of input cost inflation rose following four months of slower price rises, with interest rates, material shortages and higher wage bills being linked to the increase. However, the rate of output charge inflation eased to its softest pace since December 2020, although this remained above the long-run series average, as companies offered concessions to customers in an effort to drive new sales and remain competitive.

The flash services PMI fell from 49.3 in September to 46.6 in October, a two-month low, whilst the flash manufacturing PMI declined from 52.0 to 49.9, a 28-month low. However, manufacturing output rose from 50.6 to 50.7, a five-month high, with firms noting easing supply chain pressures and the delivery of some key inputs.


US employment growth slowed moderately in September, although it was still above expectations. The Labor Department’s closely watched employment report showed nonfarm payrolls added 263,000 jobs, less than the unrevised 315,000 gain in August but above the forecasted 250,000 increase. Although the increase was the lowest since April 2021, job gains have still exceeded the monthly average of 167,000 in the 2010s with an average of 420,000 per month so far in 2022.

There was a broad increase in hiring in September, which was led by the addition of 83,000 jobs in the leisure and hospitality industry, with the bulk of the gains at restaurants and bars. However, the leisure and hospitality sector remained 1.1 million jobs below its pre-pandemic level. Healthcare added 60,000 jobs, whilst employment rose by 46,000 in the professional and business services industry. Manufacturing employment rose as did construction, despite higher borrowing costs weighing on the housing market. Wholesale trade employment also rose, but the financial services industry saw a loss of 8,000 jobs. There were also declines in the transportation and warehousing sector, retail employment and government payrolls.

The unemployment rate, which is obtained from the household survey, fell from 3.7% in August to 3.5% in September, although this was partly due to 57,000 people leaving the workforce. Wage growth remained robust, with average hourly earnings increasing 0.3% in September, matching their gain from August. The year-on-year increase eased from 5.2% in August to 5% in September.


US consumer prices rose by more than expected in September, with rents rising at their strongest pace since 1990 whilst food costs continued to increase. The Labor Department said the Consumer Price Index (CPI) rose 0.4% in September, ahead of the 0.1% gain in August and the forecasted 0.2% increase. Food prices rose 0.8%, with the cost of food at home increasing 0.7%, whilst there were gains across all six major grocery store food groups. The increase in food prices helped offset a 4.9% fall in gasoline prices. For the twelve months through September, CPI rose by 8.2%, slightly slower than the 8.3% increase in August as well as the third consecutive monthly decline having peaked at 9.1% in June.

The so-called core CPI, which excludes volatile food and energy components, rose 0.6% in September, matching August’s gain. The increase was driven by the 0.8% rise in owners’ equivalent rent, which is what a homeowner would receive from renting a home, the largest increase since June 1990. Healthcare costs also rose by the most since October 2019, with consumers paying more for doctor visits. Core services prices increased 0.8%, the biggest gain since 1982. There were also price increases for new motor vehicles and motor vehicle insurance, as well as for household furnishings and operations, grooming, education and airline fares. However, apparel prices fell as did used cars and trucks for the third consecutive month. For the 12 months through September, core CPI rose 6.6%, ahead of August’s 6.3% increase and the largest gain since August 1982.

Retail Sales

US retail sales were unexpectedly flat in September, as households reduced their expenditure on big-ticket items amid high inflation and fast rising interest rates. Retail sales, which are mostly goods, were unchanged in September, below the forecasted 0.2% gain, but August’s reading was revised higher from 0.3% to 0.4%. On a year-on-year basis, retail sales rose 8.2% in September.

Sales at auto dealerships fell 0.4% in September, whilst receipts at service stations were 1.4% lower. Receipts at furniture stores and electronics and appliance stores were also lower, whilst sales at building materials and garden equipment retailers also fell. A further sign that consumers were reducing their discretionary spending came from the fall in sales at hobby, musical instruments and book stores. However, sales at clothing and merchandise stores rose, whilst there were gains for online and mail-order stores.

Part of the reason for the slowdown in sales is the shift from spending on goods to services, with receipts at bars and restaurants, the only services category in the retail sales report, increasing in September. The so-called core retail sales, which exclude automobiles, gasoline, building materials and food services and correspond most closely with the consumer spending component of GDP, rose 0.4% in September, whilst August’s unchanged reading was revised higher to show a gain of 0.2%.

Consumer Spending

The Commerce Department said US consumer spending, which accounts for more than two-thirds of the US economy, was stronger than expected in September despite concerns over high inflation. Consumer spending rose 0.6% in September, ahead of the forecasted 0.4% increase, whilst August’s gain of 0.4% was revised up to 0.6%. Purchases of motor vehicles rose, whilst consumers spent more on food, clothing, prescription medicine and recreational goods. Having declined in the previous two months, overall spending on goods rose 0.3% in September. Spending on services jumped 0.8%, driven by expenditure on housing and utilities, together with travel and dining at restaurants.



Interest Rates

In line with expectations, the European Central Bank (ECB) raised interest rates by 0.75% to 1.5%, the highest rate since 2009 and matching its record increase in September. The ECB also reduced a key subsidy to banks, in an attempt to force them to repay early trillions of euros’ worth of ECB loans, whilst stating that detailed discussions on the reduction of its balance sheet will begin in December. Although the bank dropped the reference in its policy statement to likely rate increases at “several” more meetings, the ECB President Christine Lagarde told a news conference that, “We will have further rate increases in the future”, whilst adding, “So it might well be several meetings”. Future increases will be based on the evolving outlook for inflation and the economy, on a meeting-by-meeting approach, to ensure the timely return of inflation to its 2% medium-term target.

Economic Growth

In its flash estimate, the European Union’s Statistics Office, Eurostat, said the Eurozone economy expanded by 0.2% in the third quarter compared with the previous three-month period, which was in line with expectations. This represented the weakest pace since the rebound from Covid-19 restrictions in the second quarter of 2021 as well as being slower than the 0.8% growth in the previous quarter.

Among the bigger economies, Germany’s economic growth was stronger than expected as it rose from 0.1% in the second quarter to 0.3%, whilst Italy (0.5%) also produced a positive surprise. However, France and Spain only grew by 0.2%, whilst a number of smaller economies suffered contractions. On a year-on-year basis, in line with expectations the Eurozone economy grew by 2.1%, slower than the 4.3% expansion in the second quarter.


Eurostat’s preliminary estimate of inflation in the Eurozone was higher than expected in October as it rose to another record high. Consumer price growth in the 19 countries sharing the euro rose from 9.9% in September to 10.7% in October, well ahead of the forecasted increase to 10.2%. Inflation in Germany, France and Italy all rose by more than expected. Energy prices continued to drive inflation, but food and imported industrial goods also pushed prices sharply higher even though services was a much smaller contributor in October. Inflation excluding volatile energy and food prices increased from 6% to 6.4%, whilst an even narrower measure that also excludes alcohol and tobacco rose from 4.8% to 5%.


The German economy unexpectedly expanded in the third quarter, with growth of 0.3% ahead of the forecasted 0.2% contraction. Private consumer spending was the only driver of growth, with the economy still struggling with the continuing pandemic effects, supply chain disruptions, weakening external demand, rising inflation and the war in Ukraine. On an annual basis, the German economy grew 1.2% in the third quarter, ahead of the forecasted 0.8% expansion.

Preliminary survey data showed the German private sector fell deeper into contraction in October, amid reports of high energy prices having a negative impact on both business costs and demand. The S&P Global flash composite PMI fell from 45.7 in September to 44.1 in October, the lowest reading since the initial Covid-19 lockdowns in early 2020. There was a broad-based deterioration by sector, led by manufacturing output as high energy costs weighed on factory production. Both manufacturing and services firms saw the weakest trends in new business since May 2020, although the former saw the steepest rate of contraction. Firms reported that demand was hit by high price pressures and growing caution among customers due to recession fears.

The private sector continued to face sharp cost pressures, with the rate of input price inflation staying well above its historical average, although it did ease slightly from September’s three-month high. Manufacturing was primarily responsible for the easing in overall pace of input cost inflation, with service sector prices little changed with the influence of higher wage bills and energy costs widely noted. There was a further sharp rise in average prices charged for goods and services, with companies passing on higher operating expenses to their customers. The flash services PMI fell slightly from 45.0 in September to 44.9 in October, a 29-month low, whilst the flash manufacturing PMI declined from 47.8 to 45.7, a 28-month low. Manufacturing output fell sharply from 47.0 to 42.5, a 29-month low.


The INSEE official statistics agency said the French economy expanded by 0.2% in the third quarter, which was in line with expectations. Economic growth was supported by domestic demand and strong fixed investment, whilst inventory changes also provided a positive contribution. However, household spending stagnated, although there was a rebound in government spending. Exports slowed for the third consecutive quarter, whilst imports increased at a faster rate. On an annual basis, the economy grew 1% in the third quarter, easing sharply from the 4.2% expansion in the previous quarter.

Following a sustained period of expansion since the start of the easing in Covid-19 restriction in April 2021, French private sector activity stagnated in October. The S&P Global flash composite PMI fell from 51.2 in September to 50.0 in October, the lowest reading since March 2021 whilst indicating no change in business activities across the private sector at the beginning of the fourth quarter.

The manufacturing sector continued to be the weakest performer, with the reduction in output often linked to lower order intakes, raw material shortages and weak market conditions. The services sector remained in expansionary territory, but unlike in recent months this eased to a pace that was too weak to offset the fall in goods production. The service sector was impacted by the ongoing uncertainty and weak client purchasing power. New orders fell across the private sector, with manufacturers notably suffering a rapid decline in new factory orders, with rising prices and slowing market conditions often cited as reasons.

Input costs continued to increase at a fast pace, with respondents often mentioning rising energy prices, whilst some also referred to higher borrowing costs and wages. Output prices also rose, with the overall rate of selling charge inflation hitting a five-month high as companies continued to pass on higher costs to their customers wherever possible. Services firms in particular saw selling price pressures, with rising interest rates and resilient demand conditions key drivers, but the manufacturing sector saw output price inflation ease. The flash services PMI fell from 52.9 in September to 51.3 in October, a two-month low, whilst the flash manufacturing PMI fell from 47.7 to 47.4, a 29-month low. Although manufacturing output rose from 43.3 to 44.2, a two-month high, it remained deep in contractionary territory with its reading of 43.4.


Asia and Emerging Markets


The Bank of Japan (BOJ) maintained its ultra-low level of interest rates, as it remained an outlier among the major global central banks that are tightening money policy. The BOJ left unchanged its -0.1% target for short-term interest rates, as well as its pledge to guide the 10-year bond yield around 0% under its yield curve control policy. The BOJ Governor Haruhiko Kuroda said Japan was making some progress towards achieving the 2% inflation target, as rising prices increase the chance more firms will raise wages next year. The BOJ increased its inflation forecasts to 2.9% for the year ending March 2023, well above the 2% target, whilst the estimates for the following two years were increased to 1.6%. Mr Kuroda said, “Our new price forecasts have put increased weight on the chance Japan will see higher inflation accompanied by wage hikes,” whilst adding, “We’re getting closer towards stably and sustainably hitting our price target. But we’re not there yet”.


China’s economic growth in the third quarter was stronger than expected, although a more robust recovery over the longer-term may be impacted by Covid-19 restrictions, the slump in the property market and the risk of a global economic recession.

Growth in the third quarter was boosted by a number of government measures to revive activity, with the world’s second-biggest economy expanding 3.9% from a year earlier, above both the forecasted 3.4% gain and the 0.4% increase in the second quarter. Final consumption was responsible for 2.1% of the expansion, whilst capital formation (also known as investment) and net exports added 0.8% and 1.1% respectively. The Chinese economy expanded by a seasonally-adjusted 3.9% quarter-on-quarter in the third quarter, the strongest pace of quarterly growth since the second quarter of 2020 and ahead of the forecasted 3.5% pace and the 2.7% contraction in the previous three-month period.

The National Bureau of Statistics (NBS) reported that China’s factory activity unexpectedly fell in October, whilst the services sector also dropped into contraction for the first time since May. The official manufacturing PMI fell from 50.1 in September to 49.2 in October, below the 50-mark separating expansion from contraction with forecasts being for a smaller fall to exactly 50. Weaker global demand and strict domestic Covid-19 restrictions, which hit production, travel and shipping, weighed on manufacturing activity. The new orders sub-index remained in contraction for the fourth consecutive month, with external demand being hit by rising interest rates, inflation and the war in Ukraine.

The official non-manufacturing PMI fell from 50.6 in September to 48.7 in October, whilst the official composite PMI, which includes both manufacturing and services activity, fell from 50.9 to 49.0. The official PMI surveys focus on the largest sample of companies, although the majority are big and state-owned enterprises.

China’s exports were stronger than expected in September, rising 5.7% compared with a year earlier, above the forecasted 4.1% gain but were below the 7.1% increase in August. It was also the slowest pace since April and the second consecutive month of single-digit growth, with global demand weakening amid high inflation. Imports rose by just 0.3% in September, matching August’s gain and below the forecasted 1% increase. This latest reading meant growth in imports remained the slowest since stagnating in April, amid spikes in Covid-19 infections and associated restrictions on movement.

Whilst export and import growth slowed, there was a stronger reading for industrial production, which grew 6.3% year-on-year in September, ahead of the 4.2% gain in August and the forecasted 4.5% increase. This was the fifth consecutive month of growth as well as the strongest pace since February, with production quickening in both manufacturing and mining, although there was an easing in utilities output.

However, retail sales data was below expectations, with the year-on-year increase of 2.5% in September below the forecasted 3.3% growth and the 5.4% gain in August. Strict Covid-19 restrictions in several big cities weighed on consumption, with sales growth moderating for both automobiles and oil products, whilst volumes fell for cosmetics, clothing, furniture, home appliances and building materials.

South Korea

South Korea’s central bank raised interest rates by 0.5% to 3%, whilst indicating there would be further increases as the higher US dollar pushed up import costs. However, two of the seven board members voted for a 0.25% increase, suggesting the pace of rises may start to ease in the future. The Governor acknowledged the pain higher borrowing costs inflicts on many households and businesses, indicating that the 3.5% level may be the high, but there was no guarantee that they would stop there. The central bank said it sees upside risks to its August projection of inflation for this year of 5.2%, which warrants further interest rate increases.

Economic growth eased to its slowest pace in a year in the third quarter, with disappointing exports offsetting pent-up spending. However, the reading did slightly beat expectations, with the economy growing by a seasonally-adjusted 0.3% compared with the previous quarter, ahead of the forecasted 0.1% gain but behind the 0.7% expansion in the second quarter. Net exports cost the economy 1.8% as imports, boosted by crude oil and machinery and equipment, grew much faster than exports. Private consumption and corporate investment in production facilities after most Covid-19 curbs were removed boosted economic growth. On an annual basis, the economy expanded by 3.1%, above the forecasted 2.8% gain and follows growth of 2.9% in the second quarter.


Singapore’s economy expanded 4.4% year-on-year in the third quarter of this year, ahead of the forecasted 3.4% gain and follows marginally revised growth of 4.5% in the second quarter. The advance estimate showed growth of 1.5% in the manufacturing sector, which was sharply slower than the 5.7% gain in the previous quarter, with declines in electronics and chemicals. However, construction output rose following an easing in border restrictions, with increased activity in both public and private sectors. Growth in the services sector accelerated, with all the underlying areas – wholesale and retail trade, information and communication, finance, accommodation and food services – recording expansion. On a quarterly basis, the economy expanded 1.5%, improving on the downwardly revised 0.2% contraction in the second quarter.


Indonesia’s central bank raised interest rates by 0.5% to 4.75%, the highest level since February 2020. Indonesia’s inflation rate rose to 5.95% in September, the fastest pace since October 2015 and above the target range of 2 to 4% for the fourth consecutive month. However, policymakers noted that the economy was in a good position, with support from private consumption and continued strength in exports.


Preliminary figures showed the Taiwanese economy expanded 4.1% year-on-year in the third quarter, ahead of the forecasted 3.2% growth and quicker than the 3.05% gain seen in the previous quarter. Private consumption was the main driver of growth, but government spending and gross capital formation (also known as investment) both slowed sharply. On a seasonally-adjusted quarterly basis, the economy rebounded 1.62% having declined 1.8% in the previous quarter.

Hong Kong

Advance government data showed Hong Kong’s economy contracted at a faster pace than expected in the third quarter, primarily due to weak performance in external trade. The economy shrank by 4.5% year-on-year in the third quarter, the third consecutive quarterly contraction and the worst decline since the second quarter of 2020. The economy fell by 4% and 1.3% in the first and second quarters respectively.

The city government said, “Looking ahead, the markedly deteriorating external environment will continue to pose immense pressure on Hong Kong’s export performance in the remainder of the year”. The government also noted the impact of geopolitical tensions and developments in the pandemic would add downside risk, despite the potential boost from easing quarantine rules for inbound visitors. On a quarterly basis, the economy contracted by a seasonally adjusted 2.6% in the third quarter, which follows 1% growth in the previous three-month period and a 2.9% decline in the first quarter of this year. The government lowered its full-year economic forecast from an expansion of between 1% and 2% to a range of 0.5% growth to a 0.5% contraction.


Mexico’s economy expanded by 1% in the third quarter, ahead of both the 0.9% growth in the second quarter and the forecasted 0.7% expansion. Agriculture produced a stronger expansion compared with the previous quarter, whilst services also saw faster growth. Manufacturing also expanded, although at an unchanged pace compared with the previous period. On a year-on-year basis, the economy expanded 4.2%, above both the forecasted 2.8% gain and the 2% rise in the second quarter.


Turkey’s central bank reduced its interest rate by 1.5% to 10.5%, which was more than the expected 1% cut, whilst also signalling it will take the same step at its next meeting to end the rate-cutting cycle. The cuts in interest rates have come despite a plunging Turkish lira and soaring inflation, which passed 83% in September, the highest level since 1998 with energy costs and the weak currency key drivers.

We generally recommend that you hold investments for the medium to long-term, which we would view as being for five years or more. The monthly market commentary provides an insight into the current factors that are affecting short-term global returns, but should not be viewed as a basis for making long-term investment decisions. You should consider your own investment goals and timeframes before making any such investment decisions. If you do have any concerns about where your money is invested, please contact your Origen adviser.

Origen Private Client Solutions is a trading name used by Origen Financial Services Limited which is authorised and regulated by the Financial Conduct Authority. Our FCA registration Number is 192666. Our Registered office is: Ascent 4, Gladiator Way, Farnborough, Hampshire GU14 6XN and registration number is: 03926629.

CAxxxx Exp xx/2023

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