Key Events: –
Tuesday: UK Inflation Data (Aug)
Wednesday: UK Labour Market Report (Jul/Aug)
Thursday: Bank Of England Decision, SNB Decision, US CPI (Aug), Australian Labour Report (Aug), UK Retail Sales (Aug)
Early sentiment is likely to be dictated by weekend events centring on North Korea. Saturday 9th September marks a national holiday, with South Korea suggesting that their Northern counterparts could conduct another nuclear/ballistic missile test on this day. This is not outside the realms of reality with Washington-Pyongyang tensions simmering and this holiday has experienced similar provocative acts in the past (although aerospace consultants have suggested that solar storms could prevent an ICBM test).
North America: –
The US docket will be backloaded next week. Thursday will bring the release of August’s CPI data with analysts looking for a headline 1.8% YY against the 1.7% seen last time out, while the core metric is expected to edge down to 1.6% YY from 1.7%. Commerzbank notes that “gasoline prices have risen markedly,” while positing that the latest price cuts for some goods and services such as hotel accommodation are unlikely to be sustainable.” While the FOMC expects the down-tick in inflation to be transitory, it is worth noting that the bulk of the Committee’s voting members have sounded more sanguine of the chances of an additional rate hike in 2017. Influential permanent voter Bill Dudley was the latest to weigh in on the matter, noting that ” inflation is below our 2% objective, this allows room for patience.”
August’s US retail sales dataset will hit on Friday with analysts looking for the headline to come in up 0.1% MM, while the control group is expected to rise by 0.3% MM against prior readings of 0.6% for both metrics. Higher gasoline prices will likely inflate nominal sales values although auto sales experienced a relatively large fall during the month.
Away from the economic backdrop, tech heavyweight (and Dow Jones Industrial Average constituent) Apple (AAPL) is holding an event on Tuesday evening, with expectations for an announcement of a new iPhone.
Other releases of note during the week: Tuesday US JOLTS Job Openings (Jul) Wednesday US PPI (Aug) Friday US Industrial Production (Aug) Manufacturing Production (Aug) Business Inventories (Jul) US University of Michigan Consumer Sentiment (Aug, P)
The Swiss National Bank will convene on Thursday with analysts expecting the SNB to leave its 3-month Libor target band unchanged at -1.25% to -0.25%, with the sight deposit rate likely to be held at -0.75%. In its post-meeting statement in June, the central bank noted that the franc remained “significantly overvalued”. Since then, it has eased by around 5% against the euro, and earlier in September, SNB chairman Thomas Jordan did note that recent weakening had eased the franc’s overvaluation, though he said the franc situation was still fragile, and he was unsure whether the weakening would be sustained. Jordan also added that the SNB remains committed to expansionary policy and that the conditions for the withdrawal of loose policy would not likely be seen in the foreseeable future. Accordingly, the central bank is expected maintain its dovish tone next week. The central bank’s stance will be aided by weak Q2 GDP growth and analysts at UBS believe that this may lead to the SNB revising its growth profile lower. On the price front, core inflation now sits at the highest levels seen since January 2015, when the SNB removed the franc’s ceiling against the EUR. Now that inflation is in positive territory and the franc has begun to weaken, when will the SNB tighten policy? UBS argues that it will be contingent upon the ECB, and specifically, when the ECB ends its asset purchases, as well as further franc weakness, with UBS’ current base case looking for a rate hike in 2018.
Other releases of note during the week: Wednesday German CPI (Aug, F), Eurozone Industrial Production (Jul) Friday Eurozone Trade Balance (Jul)
Tuesday will bring the release of the latest round of inflation data. Analysts are looking for the headline CPI print to rise to 2.8% YY in August, against the 2.6% seen last time out. Consensus also excepts the core metric to tick up to 2.5% YY from the 2.4% seen in July. Factory gate prices are also expected to accelerate, although output prices are expected to only partially reflect the uptick in producers’ costs.
The latest labour market report will hit on Wednesday. With focus on wages, the ex-bonus measure is expected to rise by 2.2% on a 3-month YY basis against the 2.1% seen in June, while the ILO unemployment rate is expected to hold steady at 4.4%. Although wage growth remains relatively muted a recent survey conducted by the Recruitment and Employment Confederation points to the tightness of the labour market beginning to show, with staff shortages leading to the fastest wages rises seen in 2 years.
The Bank of England is expected to leave its monetary policy settings unchanged when it convenes on Thursday, holding rates at 0.25% and its stock of asset purchases at GBP 445bln (GBP 435bln asset purchase programme and GBP 10bln corporate bond purchases). It is a non-QIR meeting, meaning that there will be no updated forecasts, nor a post-meeting press conference with Governor Mark Carney. It is worth mentioning that the September meeting will be the first for Sir Dave Ramsden, meaning that the MPC is back to its full contingent of 9. Both Ian McCafferty and Michael Saunders are likely to continue their dissent – Saunders recently gave a speech where he once again called for higher rates which could serve as “insurance” against a bumpy Brexit journey – so accordingly, the vote split is likely to come in at 7/2 in favour of holding rates steady. The decision itself is likely to be a non-event, so it will be the meeting minutes that will be focused on for any new insight. In terms of the labour market, the rate of joblessness has eased in line with the Bank’s forecasts, so interest will likely centre on inflation. With that said, there are increasing signs that the UK growth landscape will face tests in the quarters ahead, as the consumers continue to be squeezed by high inflation and muted wage growth. Analysts will also be keeping an eye out for discussion on the value of the pound. Goldman Sachs expect the Committee “to recognise the additional inflationary effect of sterling’s further 2% weakening in the past month,”
Other releases of note during the week: N/a
Chinese activity data for August is due on Thursday. Consensus looks for industrial production to rise by 6.6% YY with retail sales expected to rise by 10.5% over the same horizon, compared to the 6.4% and 10.4% seen in July. August’s PMI surveys were relatively upbeat, which has led to TD Securities suggesting that the skew for the releases lies to the upside.
Focus in Australia will fall on August’s labour market report which will hit on Thursday. Consensus looks for 20,000 jobs to have been added, slightly softer than the prior 27,900; the unemployment and participation rates are both seen steady at 5.6% and 65.1% respectively. ANZ points to “business conditions remaining high and the ongoing strength in job ads” and concludes that “the labour market should continue to improve, albeit gradually.” Over a longer horizon, Westpac notes a “solid uplift (in the labour market) as we have moved through 2017.” As ever, the breakdown will be of interest, with last month’s headline rise coming solely from part-time hiring. In terms of broader policy implications, the RBA has noted that the labour market has tightened although it cautions that “wage growth remains low. This is likely to continue for a while yet, although stronger conditions in the labour market should see some lift in wages growth over time.”
Other releases of note during the week: Tuesday Australian NAB Business Survey (Aug) Wednesday Japanese BSI Manufacturing Survey (Q3) Japanese PPI (Aug) Thursday Japanese Industrial Production (Jul, F) Japanese Capacity Utilisation (Jul) Australian Melbourne Institute Inflation (Aug) During The Week New Zealand House Sales (Aug)