Key Events: –
Monday: Japan GDP (Q2, P)
Tuesday: UK Inflation Data (Jul), US Retail Sales (Jul) RBA Meeting Minutes
Wednesday: FOMC Meeting Minutes, Eurozone GDP (Q2) UK Labour Market Report (Jun/Jul)
Thursday: UK Retail Sales (Jul), Australian Labour Market Report (Jul), ECB Meeting Minutes (Jul)
North America: –
Wednesday brings the release of the meeting minutes from the FOMC’s latest monetary policy decision. The meeting resulted in the FOMC leaving its federal funds rate target band unchanged at 1.00%-1.25%. The Committee announced that it expected to begin shrinking the balance sheet “relatively soon,” a message that has been echoed by various speakers since the decision, with eyes on the September meeting. While pressures weighing on inflation have been deemed “transitory,” 2017 voters Kashkari and Kaplan have stressed that the Fed should adopt a wait and see approach regarding rate hikes. Tuesday will bring the release of US retail sales data for July, with all 4 metrics expected to rise by 0.4% on a MM basis. HSBC expect the dataset will be “supported by strong growth in online sales and restaurant spending. However, we expect that both auto dealer sales and gasoline station sales declined.”
Friday brings the release of Canada’s CPI series for July. Analysts expect a headline print of 0.1% MM and 1.3% YY, against prior readings of -0.1% and 1.0% respectively. It is worth noting that the average of the BoC’s three core measures moved up in June for the first time since January, though it remains subdued at 1.4%. The BoC’s July MPR noted that the Bank will be watching inflation developments closely, although its profile does not suggest a near-term pick-up in price pressures. RBC expect energy prices to weigh on the print, while food prices should prove to be supportive. A stronger Canadian dollar should also act as a headwind for prices in the upcoming release. Looking forwards CIBC believe that “we should see some firming in inflation before year-end, with oil prices having edged up again and with food inflation becoming a greater positive. Reduced economic slack should also see core inflation accelerate gradually, although given the lags involved we expect it will be close to mid-2018 before ex-food/energy and the common component are above 2%.”
Other releases of note during the week: Wednesday US Building Permits (Jul), US Housing Starts (Jul) Thursday Canadian Manufacturing Sales (Jun), US Industrial Production (Jul), US Manufacturing Production (Jul) Friday US University Of Michigan Consumer Survey (Aug)
The Eurozone’s second Q2 GDP estimate is expected to hold steady at 0.6% QQ and 2.1% YY. HSBC expect that “household consumption has maintained the pace of growth that it has kept up for the past year or so.” They also expect “investment and net trade to have contributed positively, the latter still driven by strong global demand and the euro depreciation in H2 2016.”
Thursday will bring the release of the minutes from ECB’s latest monetary policy meeting minutes. At the meeting the ECB did not make any change to rates, QE and forward guidance, and no indication was given on when a decision will be made on the future of QE after December, other than it will be in the autumn. ECB President Draghi offered little colour on the discussion within the governing council, and focus is now falling on his appearance at the upcoming Jackson Hole symposium. Regarding inflation, Draghi reaffirmed that there is “no convincing sign of a pick-up in underlying inflation” in the Eurozone and that “inflation is not where we want it to be”, backtracking slightly from the statement he made at the end of June in Sintra, where he mentioned that “deflationary forces had been replaced by reflationary ones.”
Other releases of note during the week: Monday Eurozone Industrial Production (Jun) Tuesday German GDP (Q2) Thursday Eurozone CPI (Jul, F), Eurozone Trade Balance (Jul)
The UK docket is full of tier one data releases, with July’s inflation data slated for Tuesday. Consensus looks for a tick up in the YY releases, with the headline seen at 2.7% from 2.6% and the core print seen at 2.5% from 2.4%. Last month’s headline CPI release surprised to the downside, which gave the BoE some breathing room, with the headline release edging away from the feared 3.0% level. That doesn’t mean that the central bank is off the hook, as the softer sterling has continued to drive up the price of food, while hikes in utility prices have come to the fore in recent months. ING note that “while this is likely to raise some eyebrows among the MPC hawks, we would caution that part of this increase is also due to the transitory effects of a weaker currency. Given that domestically generated inflation overall is likely to remain muted for some time, as a result of greater BoE tightening sentiment – may prove short-lived.”
Wednesday brings the release of the latest labour market report. The unemployment rate is expected to hold steady at 4.5%, while median expectations point to wage growth remaining anaemic, with weekly earnings expected to moderate to 1.7% on a 3M YY basis from 1.8% last time out, while the ex-bonus metric is expected to rise to 2.0% from 1.9% over the same horizon. Such wage growth is set to provide limited inflationary pressure, and consensus looks for this to be the case for at least the rest of the year, with questions circling over the BoE’s 3% wage growth forecasts for 2018.
July’s retail sales set is due on Thursday, with analysts looking for a flat headline MM read against 0.6% last time out, with the core metric seen at 0.9% MM against a flat prior. June’s dataset was supported by hot weather, but the uncertainty generated by Brexit and survey evidence suggest that UK consumers are starting to feel the pinch.
Other releases of note during the week: N/a
Chinese activity data from July is due on Monday, with analysts looking for industrial production to print at 7.2% YY from 7.6% last time out, while retail sales are expected to moderate to 10.8% YY from 11.0%. Upbeat PMIs for July point to modest upside risks for the industrial production release, while the services and non-manufacturing PMIs didn’t fare as well, which could weigh on retail sales.
The initial Japanese GDP release for Q2 is due on Monday, with analysts looking for growth to accelerate to 0.6% QQ from 0.3% in Q1, while the annualised metric is expected to come in at 2.5%, against a prior 1.0%. In terms of the breakdown, capital expenditure is expected to have risen by 1.2% QQ, compared to 0.6% in Q1. In terms of headwinds, external demand looks set to weigh on the release, although strong imports through the quarter support the idea of a recovery in domestic demand.
In Australia early focus will fall on the release of the minutes from the RBA’s most recent monetary policy decision, slated for Tuesday. TD Securities note that “usually the Board minutes that are released after the semi-annual monetary policy testimony are irrelevant and out of date, however, after last month’s horror, the markets will be pouring over the details, just in case.” The statement which accompanied the decision noted that economic activity will be slower if AUD continues to appreciate, and since then RBA Governor Lowe has noted that the Bank stands ready to intervene in the FX market if it deems fit (it doesn’t at present). The minutes will be supplemented by speeches RBA members Kent (on Monday) and Ellis (on Thursday). Thursday will also bring the release of the Australian labour market report from July. Analysts expect that the labour force added 20,000 roles, with the unemployment and participation rates seen steady at 5.6% and 65.0% respectively. ANZ suggest that “while the labour market numbers have been particularly strong over recent months, ongoing solid growth in job ads and elevated business conditions suggest that the strength is likely to continue in the near term.”
Over the Tasman the key focus will be New Zealand’s Q2 retail sales data, due on Monday. Analysts are looking for 0.7% QQ, against a prior 1.5%. Q2 (nominal) retail card spending was exceptionally weak, which surprised analysts, and doesn’t bode well for the upcoming release. Tuesday will see the results of the latest dairy auction, the previous event saw the headline index fall 1.6% to USD 3,343, while whole milk powder prices rose by 1.3% to USD 3,155.
Other releases of note during the week: Tuesday Japanese Industrial Production (Jun) Wednesday Australian Wage Price Index (Q2), New Zealand PPI (Q2) Thursday Japanese Trade Balance (Jul) Friday Chinese House Prices (Jul)