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The Economic Week Ahead

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Main Macro Events This Week

United States: Housing and manufacturing reports dominate the data calendar. June housing starts (Tuesday) are forecast rising 0.5% to a 1.170 mln pace, after dipping 0.3% to 1.164 mln in May. Risk is to the downside, though, after weak construction employment in the jobs report. The July NAHB homebuilder sentiment index (Monday) is expected to dip back to 59, after jumping 2 points to 60 in June.  June existing home sales (Thursday) are seen rising 0.4% to a 5.550 mln rate, which would be a fourth consecutive monthly gain. The May FHFA home price index (Thursday) is also expected to improve, and has risen every month since January 2012. The Philly Fed’s manufacturing index (Thursday) is projected inching up to 5.0 in July after bouncing 6.5 points to 4.7 in June, from -1.8 in May. The flash July Markit manufacturing index (Friday) is also on the docket. Initial jobless claims for the week ended July 16 will be important since it coincides with the BLS survey week. May Treasury capital flow (TIC report) numbers are also due (Monday).

The Republican National Convention kicks off Monday in Cleveland, Ohio. Over the weekend Donald Trump announced Mike Pence, governor of Indiana, as his running mate. Ironically, there are divisions between their views on the war in Iraq, trade, and gay rights, while their campaign styles are diametrically opposite too.

Canada:  The calendar features CPI and retail sales this week. June CPI is expected to expand 0.2% m/m in June following the 0.4% increase in May as higher gasoline prices provide another boost. We see a 0.1% m/m gain for May retail sales values following the 0.9% gain in April. Retail sales excluding the autos aggregate are expected to nudge 0.3% higher in values terms during May after the 1.3% bounce in April. Wholesale shipment values are seen falling 0.5% m/m in May after the 0.5% drop in April, with a larger decline seen in values terms during May. There is nothing from the BoC this week.

Europe: While attention will turn to the events in Turkey over the weekend, along with continuing thoughts on Nice and Brexit, the focus will shift to the first round of major survey indicators since the Brexit referendum and of course the ECB, which meets Thursday. Expectations are for the bank to remain on hold for now, following the BoE’s example. Draghi has in fact been surprisingly quiet since the Brexit referendum and the next important date on the calendar is the September set of updated forecasts and staff projections. They are likely to bring downward revision to growth projections and we expect the ECB to make some changes to its monetary policy then, although it is unlikely to be more than some tweaking.

The first round of major post-Brexit survey indicators are out this week:  German ZEW investor confidence and Eurozone PMI readings. The ZEW number especially (Tuesday) will be heavily impacted by the Brexit outcome. PMIs on Friday are also expected to feel the sting and we are looking for a decline in the manufacturing PMI to 52.2 from 52.8 and a drop in the services reading to 52.3 from 53.1. Preliminary consumer confidence reading (Wednesday) and The ECB also releases the latest bank lending survey on Tuesday, although, this will be backward looking.

UK: Anecdotal signs of economic slowing abound, from property market transactions, to advertised job vacancies, to delayed business investment decisions, although consumer spending seems to be holding up. This week brings, for the first time in the case of the UK, preliminary readings of July PMI data from Markit (Friday), which will give a post-Brexit vote snapshot. The Bloomberg survey’s median forecast is for a dive in the composite PMI reading to 48.5 from 52.4 in June, which would be the weakest reading since the 2008 financial crisis and would affirm the Brexit-caused slowdown. The final July PMI numbers will be released in the first week of August. Other data included June inflation data (Tuesday), labour data covering May and June (Wednesday) and official June retail sales figures (Thursday).

China: No data releases this week.

Japan: The main calendar entry after Monday’s Marine Day holiday comes on Thursday with the May all-industry index, expected to fall 1.0% m/m versus the prior 1.3% increase. Construction spending (Tuesday), the Reuters Tankan (Thursday), and the flash Markit PMI (Friday) are also due.

Australia: The Reserve Bank of Australia will release the minutes to the July meeting (Tuesday). The RBA left its official cash rate unchanged at 1.75% earlier this month, as had been widely anticipated. The central bank unexpectedly cut rates in May to 1.75% from 2.00% following an unexpected drop (q/q) in Q1 inflation.


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Stuart Cowell

Market Analyst


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