Main Macro Events This Week
There’s plenty of data this week to provide clues, though tariff and trade uncertainties will continue to muddy the outlooks, especially as they impact growth and inflation dynamics. Meanwhile, central bank policies are in play with FOMC, BoE, and BoJ meetings.
United States: Traders will be actively monitoring this week’s heavy data slate, including Nonfarm Payrolls, ISM, Vehicle Sales, Trade, the ECI, and Confidence. Additionally, the FOMC meets (Tuesday, Wednesday), but it should be a non-event. There’s also the advent of supply with the August Refunding announcement. The July Employment report (Friday) holds its usual top spot as the indicator of the month. The Unemployment rate is expected to dip back to 3.9%, while earnings should rise 0.3%. Nearly all labor market indicators have boasted of very tight conditions and extreme difficulty in finding qualified workers, which resulted in a huge jump in the labor force in June. The Manufacturing ISM (Wednesday) is projected to fall to 59.0 in July, from June’s 60.2, and down only slightly from the 14-year high of 60.8 from February, and would still reflect a robust rate of expansion. The Non-Manufacturing ISM (Friday) should decline to 58.0 in July, from 59.1 in June, and from the 12-year high of 59.9 in January. July Vehicle Sales (Wednesday) are expected to slow modestly to 17.2 mln from a 17.4 mln June pace.
The June Trade Deficit (Friday) will get additional scrutiny for indications of trade flows. The deficit is estimated to narrow to an average -$135.7 bln in Q2, down from -$142.3 bln in Q1. Net exports detracted from growth in Q4 and Q1 but there was a strong positive contribution from this component in Q2 GDP. June Personal income and Consumption (Tuesday) should help fine tune Q2 GDP forecasts. The Q2 Employment Cost Index (Tuesday) is estimated rising 0.6%, moderating from a 0.8% gain in Q1. Also, July Consumer Confidence (Tuesday) is expected to rise to 127.0, from a 126.4 level in June. Confidence measures continued to be well-supported by the strength in the economy and the tight labor market.
Canada: Canada releases its May GDP report (Tuesday) which will be the highlight of the week, though June trade (Friday) will also featuring prominently. The calendar is otherwise rather sparse, with the June industrial product price index (Tuesday) and the July Markit manufacturing PMI (Wednesday) rounding out the docket. GDP is expected to grow 0.2% in May (m/m, sa) after the 0.1% rise in April. Retail sales rebounded in May after a weather driven drop in April, supportive of firm GDP growth. Manufacturing and wholesale shipments also improved. But some operations at some refiners remained shut down for maintenance, which could exert a sizable drag on total GDP growth in May. The trade deficit is seen narrowing to -C$2.3 bln in June from -C$2.8 bln in May. The industrial product price index is seen slipping 0.3% in June (m/m, nsa) after the 1.0% surge in May. The Markit manufacturing PMI for July may show some slippage in activity after climbing 0.9 points to a record high of 57.1 in June, with strength in new orders.
Europe: This week’s data releases won’t have an immediate impact on the rate outlook as there will be another set of data before the next policy meeting. Still, with the next round of confidence data and preliminary July inflation numbers ahead, the calendar will be important for the medium term outlook. On the whole data expected to confirm the central bank’s central scenario of robust, but slowing growth accompanied by a gradual rise in underlying inflation.
The preliminary reading for Eurozone Q2 GDP (Tuesday) headlines this week and a marginal acceleration is expected in the quarterly growth rate to 0.5% q/q from 0.4%. The already released French number came in lower than expected and saw an unchanged quarterly rate of 0.2%, but this was partly due to the impact of strike action last quarter. Even if the quarterly growth rate comes in a tad below expectations, Draghi already acknowledged that some of the weakness in the Q1 had spilled over into the second, so modest Q2 growth is already part of ECB’s central scenario.
The ESI Economic Confidence reading (Monday) is expected to dip to 112.1 from 112.3 in the previous month, with the renewed decline in confidence tying in with slightly weaker PMI and IFO readings. Indeed, the Manufacturing PMI (Wednesday) is expected to be confirmed at 55.1, in line with the preliminary number, but the Services PMI (Friday) is expected at 54.4, which should leave the composite reading at 54.3, unchanged from the preliminary reading and down from 54.9 in June. Confidence is starting to erode, even as data still points to ongoing robust growth. But the survey also reported that price pressures remain elevated. Results in line with the preliminary inflation readings are expected to leave the German HICP print (Monday) unchanged at 2.1%, the French reading (Tuesday) at 2.3% and the Eurozone reading (Tuesday) unchanged at 2.0%. This is already in line with ECB’s upper limit for price stability. Yet, with core inflation still much lower, the elevated headline reading is not sufficient to force Draghi to bring forward the timing for the first rate hike. ECB is getting more confident, though, that underlying inflation is slowly moving higher, especially with improvements in labor markets underpinning wage growth. A further decline in German jobless number (Tuesday) by -4K is anticipated, which would leave the July seasonally adjusted jobless rate unchanged at 5.2%). Eurozone June unemployment meanwhile is also seen unchanged at 8.4%.
UK: Top of the agenda is the August BoE MPC meeting (announced Thursday), which will come with the publication of the central bank’s latest quarterly inflation report. BoE is anticipated to hike the repo rate by 0.25 bp, which would take it to 0.75%. This would be the 3rd increase within a gradual tightening cycle, and the vote at the 3-member Committee is seen to be 7 to 2. At the same time, BoE should leave the QE total at GBP 435 bln for government bond purchases and GBP 10 bln for corporate bond purchases.
The data calendar this week is highlighted by monthly BoE Lending data (Monday), Consumer Confidence (Tuesday), and the July PMI surveys (due from Wednesday through to Friday). Of these, Gfk Consumer Confidence for July to hold at -9, the same as in June, while the Manufacturing PMI expected (Wednesday) at 54.0 in the headline after 54.4 in June, and the Services PMI (Friday) at 54.7 after 55.1 in the month prior.
Japan: There will be a lot of interest in the BoJ meeting (Monday, Tuesday) given recent news reports of a policy tweak to its yield curve management (YCC) strategy. Worries that such a move could be an early warning of a shift away from uber-accommodation saw JGB yield spike higher, which forced BoJ to step in and offer to buy an unlimited amount of paper. BoJ is not expected to suggest a more hawkish stance is on the way. As for data, June Unemployment (Tuesday) is expected steady at 2.2%, with the job offers to seekers ratio unchanged at 1.60. Preliminary June Industrial Production (Tuesday) should fall 1.0% m/m from the previous -0.2% reading. July Consumer Confidence (Tuesday) is forecast little changed at 43.5 from 43.6. Also, June housing starts and construction spending (Tuesday) with the former seen contracting at a 2.0% y/y rate, from 1.3% previously. The final July Manufacturing PMI (Wednesday) is penciled in falling to 52.0 from 53.0. It was 2.1 a year ago. July auto sales are also due Wednesday.
Australia: The Building approvals (Tuesday) are expected to rise 1.0% in June after the 3.2% drop in May. The Trade Balance (Thursday) is seen improving to A$1.1 bln in June from A$0.8 bln in May. Retail Sales (Friday) are projected to grow 0.4% in June, matching the 0.4% growth pace (m/m, sa) in May. RBA is uncharacteristically silent until the August 7 meeting.
New Zealand: The Employment report (Wednesday) is expected to show a 0.7% gain in Q2 (q/q, sa) after the 0.6% improvement in Q1. A 4.4% unemployment rate is anticipated, which would match the jobless rate from Q1.
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