A heavy data and event calendar awaits markets this week. The Federal Reserve meets on 1st August but with no rate hike expected markets are likely to pay equal attention to PCE inflation, PMI and labour market data for July.
In the Eurozone, the focus will be on preliminary data for Q2 GDP, July CPI-inflation and to a lesser extent on June retail sales, with modest economic growth and inflation likely to keep in check expectations for ECB rate hikes.
The Bank of England meets on Wednesday and markets are seemingly confident of a 25bp rate hike to 0.75% but manufacturing, construction and service PMI numbers for July will give a sense of whether UK growth picked up further in early Q3.
Finally Australia will release trade and retail sales data for June but they are unlikely to change expectations that an RBA rate hike is very unlikely until next year.
Monday 30th July
United Kingdom: Consumer credit (June).
Tuesday 31st July
Eurozone: CPI-inflation (July, preliminary). The consensus forecast is that headline and core CPI-inflation were broadly unchanged from 2.0% yoy and 0.9% yoy in June. Broadly stable CPI-inflation at these levels would probably be sufficient for the European Central Bank to feel confident about sticking to its planned tapering of its QE program (starting in October) but would probably do little to change the ECB’s current view that rates hikes are unlikely until after summer 2019.
Eurozone: GDP (Q2). Consensus forecast is that year-on-year GDP growth slowed to 2.2% in Q2 from 2.5% in Q1 which would tie in with the two percentage point fall in the combined manufacturing and services PMI in Q2. This would imply only a modest pick-up in quarter-on-quarter growth to 0.44% in Q2 from 0.36% qoq in Q1 although the risk is probably biased towards slightly better-than-expected growth. In any case data are likely to point to only a slow recovery in Eurozone economic growth, particularly when compared to the United States where GDP growth hit 1.0% qoq in Q2.
United States: Personal Consumption Expenditure price indices (June). The Federal Reserve closely tracks these important measures of US inflation with year-on-year headline and core PCE inflation having risen four consecutive months to 6 year highs. The consensus forecast is for core PCE inflation to have remained unchanged at 2.0% but this would still leave the door open to the possibility of the Federal Reserve hiking rates twice more before year-end.
Wednesday 1st August
United Kingdom: Manufacturing PMI (July). This survey of manufacturing activity was unchanged at 54.4 in June and the consensus forecast is for a modest dip to 54.2. But with manufacturing only accounting for about 10% of UK GDP, markets (and policy-makers) are likely to pay greater attention to the services PMI numbers out on Friday.
United States: Private-sector employment (July). The consensus forecast is that private-sector employment rose by a further 186,000 following a 177,000 increase in June. The US labour market is tight on many measures but the key question for the Federal Reserve and markets remains whether this will translate into a faster pace of wage increase.
United States: ISM Manufacturing PMI (July). With GDP data for Q2 having slightly disappointed relative to exuberant expectations, focus will now turn to growth in early Q3 and whether the US economy is starting to feel the pinch from the introduction of US and global import tariffs in May-June. The consensus forecast is that this closely-followed measure of economic activity slowed to 59.4 from 60.2 in June. This would still be strong by historical standards and other surveys for the manufacturing sector show that manufacturing activity remained buoyant in July.
United States: Federal Reserve policy meeting. The Fed is expected to keep rates on hold n and focus will be on the policy statement’s language, specifically references to Q2 GDP data and the US/global economic growth outlook given trade-war concerns. Bottom line is that markets will be looking for signs of whether the Fed is slowly baking in a 25bp September hike.
Thursday 2nd August
Australia: Trade balance (June).
Switzerland: Retail sales (June). Swiss retail sales growth has been very volatile year-to-date but has been on the weak side, which in turn has likely stopped the Swiss National Bank from being more hawkish. In any case the forecast is that retail sales remained broadly unchanged in June for the second consecutive month.
United Kingdom: Bank of England policy meeting and quarterly inflation report. The market is currently pricing in 22.5bp of hikes on the back of stronger UK macro data in April-May and hawkish comments in recent weeks by BoE governor Carney. However, with the market almost fully priced in for a 25bp hike Sterling may not rally much if the BoE delivers on only its second hike in the cycle. Moreover, the BoE may struggle to convince markets that a second hike is feasible before year-end, particularly if the nine MPC members were split in their votes for a rate hike on Thursday. In any case markets are likely to quickly refocus on the far bigger issue of Brexit.
Friday 3rd August
Australia: Retail sales (June). Retail sales growth was very choppy in Q1 but stabilised at 0.4% mom in both April and May and even if it slowed to 0.3% mom in June, as expected, it would cap a decent quarter for Australian retail sales. But this will need to translate into faster CPI-inflation for RBA rate hikes to become a possibility any time soon.
Switzerland: CPI-inflation (June). Inflation has slowly risen from 0.6% yoy in January to 1.1% yoy in June and the expectation is for another small up-tick to 1.2% yoy. Modest demand-driven inflation is likely to reinforce the Swiss National Bank’s conservative outlook for Swiss growth and monetary policy.
United Kingdom: Services PMI (July). With services accounting for the bulk of UK GDP, this measure of economic activity gets much attention. As for the manufacturing PMI, analysts expect a small drop in July to 54.7 from 55.1 which again would suggest that UK GDP growth remained modest in early Q3 following an expected 0.4% qoq in Q2.
Eurozone: Composite PMI (July). Eurozone economic growth likely failed to recover much in Q2 but this data release will give a first glimpse of how manufacturing and services activity fared early Q3. Analysts forecast an unchanged composite PMI of 54.3 in July
Eurozone: Retail sales (June).
United States: Labour market data (July). The US economy continued to generate jobs at a rapid clip of over 200,000 per month in May and June and the consensus forecast is for another sizeable rise in non-farm employment of 193,000. But again the bigger question for markets and the Federal Reserve is whether a clearly tight US labour market will translate into more rapid wage (and CPI) inflation going forward.
United States: ISM non-manufacturing PMI (July). Economic activity in services, like in manufacturing, was robust in May and June – which translated into strong GDP growth of 4.1% in Q2 – and analysts expect only a modest slowdown in service-sector activity in July to 58.7 from 59.1.
