The Economic Week Ahead

Main Macro Events This Week

August U.S. nonfarm payroll report disappointed on multiple levels after the 151k headline increase came in below last week’s 180k median, while the unemployment rate held at 4.9% versus expectations for a dip to 4.8%. Moreover, the workweek and earnings underperformed too, though the boost in the labor force was actually encouraging. Nevertheless, there was little net shake up in Fed policy expectations versus last week and December remains the odds-on favorite over September for the next move this year.

United States:  The U.S. economic calendar will be brief this week following the long Labor Day weekend, resuming (Tuesday) with ISM Non-Manufacturing, expected to hold steady at 55.5 in August. The MBA mortgage market survey and JOLTS are up next (Wednesday), though neither will be of much consequence to the September FOMC. Initial jobless claims are forecast to ease another 3k to 260k for the September 3 week (Thursday), while consumer credit is set to rise $15.0 bln iln July vs $12.3 bln in June. Wholesale trade data rounds out the meager schedule (Friday) with sales likely to rise 0.2% and inventories seen unchanged for July. Fedspeak resumes with SF Fed dove Williams (Tuesday) set to discuss the economic outlook before the Hayek Group. KC Fed hawk George and Richmond Fed hawk Lacker will testify before the House Financial Services Committee (Wednesday) from 10 ET. Boston Fed dove Rosengren will take part in a Chamber Breakfast and Economic Forecast session (Friday). Dallas Fed moderate Kaplan will also participate in a Q&A session.

Canada: The economic data calendar is busy, Wednesday to Friday, following Labor Day today . The employment report (Friday) takes top billing, with jobs expected to improve 20.0k in August after the 31.2k drop in July. The unemployment rate is projected at 7.0%, up from the 6.9% reading in July. The August Ivey PMI (Wednesday) is expected to improve to 58.0 from 57.0 in July. Capacity utilization (Thursday) is expected to fall to 80.0% in Q2 from 81.4% in Q1. Building permits (Thursday) are seen rising 2.0% in July after the 5.5% drop in June. The new home price index (Wednesday) is expected to rise 0.1% m/m in July following the 0.1% gain in June. Housing starts (Friday) are seen slowing to 195.0k in August from 198.4k in July. The BOC has a rate announcement and press conference (Wednesday) with no change to the current 0.5% expected. Deputy Governor Lane has a presentation (Thursday).

Europe: The ECB will kick off this month’s round of major central bank meetings on Thursday. For Draghi the key question is whether the mixed data releases and the still low inflation numbers justify further action or mainly mean that the ECB won’t follow the Fed in its path to a policy normalisation. The data calendar has German manufacturing orders, which will be watched carefully after the marked drop in German manufacturing sentiment. The production number meanwhile is still likely to be impacted by the decline in orders seen in the proceeding months. EMU Services PMI, (Monday) is likely to be confirmed at a still robust 53.1. Tuesday, sees the final reading of Q2 GDP for the Eurozone, with the overall quarterly growth rate expected to be confirmed at 0.3%.

UK: There are several things to note about the UK. The first is that the economy has and is rebounding from the disruptive influences of the initial shock of the Brexit vote in late June, driven by the consumer sector and sharpened competitiveness from the 12%-plus decline in sterling. But the country is in a post-Brexit vote and pre-exit negotiations limbo, which is impeding business planning and investment. PM May last week repeated her “Brexit means Brexit,” which suggests the UK is destined for a “hard” EU exit, but yesterday she said queried the points-based migration plan so favoured by many Brexit voters and many in her own cabinet.

Services PMI (Monday) the August survey is expected to show a headline of 50.0 after July’s dive to 47.4. Production data for July is also up this week (Wednesday), which we expect will reveal declines of 0.1% and 0.3% in the respective industrial and manufacturing output readings. The August RICS house price index and July trade data are also up (Thursday and Friday, respectively). Last week’s August manufacturing PMI report portended a narrowing in the deficit, with manufacturers having reported increased export orders.

China: The August services PMI (Today) rose to 52.1 (a little above expectations) from 51.7, while the August trade surplus (Thursday) should narrow to $47.0 bln from $52.3 bln in July. August CPI and PPI (Friday) are penciled in at 1.8% y/y, unchanged from July, and -1.0% from -1.7%, respectively.

Japan: August services PMI (Today) fell to 49.6 from 50.4 in July.  Thursday there is the second look at Q2 GDP, which we expect will be unchanged at up 0.2% q/q.  The July current account surplus (Thursday) is seen widening to JPY 1,900.0 bln from 974.4 bln previously. August bank loan data are also set for a Thursday release. The July tertiary index (Friday) should rise 0.5% m/m as compared to June’s 0.8% increase. BoJ Governor Kuroda spoke at the at the G20 earlier today and was rather negative on the prospects of further monetary policy easing.

Australia: Reserve Bank of Australia (Tuesday) is expected to hold rates steady at 1.50% after the widely expected 25 basis point cut that was delivered in August. Q2 GDP (Wednesday) is expected to moderate to an 0.4% growth rate (q/q, sa) after the 1.1% gain in Q2. The trade report (Thursday) is projected to reveal a -A3.0 bln  deficit in July after the -A$3.2 bln shortfall in June. The current account deficit (Tuesday) is seen at -A$22.0 in Q2 after Q1’s -A$20.0 bln in red ink. Housing finance (Friday) is expected to fall 1.0% m/m in July after the 1.2% gain in June. The Melbourne Institute Experimental Inflation Gauge (Today) rose to 1.2% from 1.0% and and ANZ job ads (Today) also rose to 1.8% from -0.8% previously. RBA Deputy Governor Lowe gives welcome and introductory remarks at an international conference in Sydney (Thursday).


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Stuart Cowell

Market Analyst


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