Newsquawk Week Ahead – Highlights: US Jobs Report, ISM; Chinese PMI; Easy inflation

  • MON: EU Defense Ministers Meeting (1/2), UK Summer Bank Holiday; Australian retail sales (July), Swedish trade balance (July).
  • TUE: Meeting of EU defense ministers (1/2), BNH policy announcement; Japanese unemployment (July), German CPI Prelim. (August), UK BoE Consumer Credit (July), EZ Consumer Confidence Final (August), US Consumer Confidence (August), JOLTS (July).
  • MARRY: Japanese Retail Sales (July), Japanese Consumer Confidence (August), Chinese NBS PMI (August), German Unemployment (August), EZ HICP Flash (August), Canadian GDP (Q2), US Chicago PMI (August).
  • GAME: Australian, Japanese, EZ, UK, Canadian and US Final Manufacturing PMI (August), Swiss CPI (August), German Retail Sales (July), US Challenger Layoffs (August), IJC (w/e August 22), ISM Manufacturing PMI (August), construction spending (July), EZ unemployment (July).
  • FRI: German Trade Balance (July), EZ Producer Price (July), US NFP (August), US Factory Orders (July) and Durable Goods Revisions (July).

NOTE: previews are listed by order of the day

Chinese NBS PMI (Wednesday):

The latest Chinese PMI data is due next week, in which participants will monitor whether there is a further slowdown in Chinese factory activity after the official July manufacturing PMI headline unexpectedly contracted to 49, 0 vs. Exp. 50.4, while the non-manufacturing PMI and the composite PMI slowed from the previous month, but remained in expansion territory at 53.8 and 52.5, respectively. The slowdown in manufacturing coincided with a decline in new orders and new export orders to suggest weaker demand at home and abroad, with activity also impacted by the company’s strict zero-COVID policy. China which has led to closures in several areas to contain sporadic outbreaks. of infections. Additionally, ING suggested that some industries that contracted were associated with building construction and that the recent issue of unfinished real estate projects may have contributed to the slowdown in manufacturing, but believes domestic demand may pick up in September if the situation regarding unfinished residential projects is resolved. Conversely, this month’s release may not bring much optimism due to COVID measures and industry disruptions from a power crisis, as a record heat wave and drought in China led to power shortages that prompted Chinese Sichuan to cut power to factories in the province, which is a key manufacturing hub for vehicle electronic cells and solar panels.

Euro area HICP (sea):

The August HICP reading is expected to rise from 8.9% to 9.0% year-on-year, with the super-core metric rising from 4.0% to 4.1%. The July report was characterized by renewed upward pressure on food prices, while energy inflation remained elevated and translated into additional second-round effects, leading to higher undercurrent inflation. underlying. More of the same is expected in August; Credit Agricole notes that a higher-than-expected reading will likely increase calls for a 50 basis point rate hike by the ECB, although the bank warns that “there’s not much to it but a hike more aggressive rates the ECB could achieve”. Further, SocGen notes that inflation is expected to peak between 9.8 and 10% in the fourth quarter and notes that “the recent 2023 fixing price revision is consistent with more rigid inflation than previously thought (with inflation set at 7.75% for June 2023). Subsequently, the bank states that “markets are currently consistent with inflation returning to the 2-2.5% range by the end of 2024 and then hovering around those levels for the next five years. As it stands, markets are fully pricing in the ECB’s 50bp rate moves for the September and October meetings, with another 25bp hike expected in December.

US Manufacturing ISM PMI (Game):

Consensus expects the ISM manufacturing report to decline slightly in August to 52.6 from 52.8 in July. By comparison, S&P Global’s U.S. manufacturing PMI was also expected to be little changed in August, but fell nearly a point to 51.3, its lowest level in just over two years, and continued to rise. report moderate operating conditions throughout manufacturing. sector in a context of weak demand and reduced production. In the S&P report, the manufacturing production index slipped to a 26-month low of 49.3 (from 49.5 in July), contracting for the second consecutive month. “Ongoing supply chain issues, coupled with weak customer demand, have led to lower production,” S&P said, “Rising input prices have also helped dampen customer demand as some companies said customers are keeping a closer eye on inventory and essential spending.” The report notes that new export orders fell sharply as inflationary pressures in key export markets weighed on demand, but that said, manufacturers saw the lowest cost increase since January 2021, and the rate of inflation is said to have slowed following the fall in the prices of certain key inputs. , while producers of goods raised their selling prices at the slowest pace in a year and a half in a bid to boost sales. S&P said there were signs of improvement in supply chain disruptions and delivery times have lengthened by the least amount since October 2020.

Swiss CPI (game):

The July reading came in at 3.4% yoy, in line with the previous one and slightly below the 3.5% expected, though still (poorly) comfortably above the peak forecast of 3 .2% of the SNB in ​​Q3-2022. The SFO said the stability was due to opposing trends that broadly offset each other, with fuel oil prices declining alongside clothing amid seasonality factors while gasoline prices rose. In the wake of the lower-than-expected metric, pressure was seen on the franc on a diminishing likelihood of intra-meeting action to fight inflation; a story that has received particular attention following the publication of a document “National Bank in brief”, according to which political measures can be taken at any time. For August, YY printing is expected to rise again to 3.5% from 3.4%, with a forecast range of 3.3-3.6%; as such, the arguments presented in the last report and in particular the emphasis on potential intra-meeting action remain much the same. Further ahead, the SNB’s next announcement will be on September 22, and barring a significant upside surprise in the inflation narrative, the Bank will likely wait until that rally before potentially offering another up 50 basis points from its current level of -0.25%. For reference, SNB’s Jordan is scheduled to speak Aug. 27 in Jackson Hole, which could provide some new clues ahead of the data release.

US Nonfarm Payrolls (Friday):

Traders will be fixated on the stock (which gives us a measure of economic growth conditions) as well as the payroll data (which gives us a measure of inflation trends); the data will be used to inform the debate on whether the Fed will raise rates by 50 basis points or 75 basis points at the September 21 FOMC. After the jobs report’s surprise explosion in July, the stock is expected to resume moderation in the rate of payroll growth, with the consensus looking for 290,000 to add to the economy in August (before 528,000, average over 3 months 437,000, 6-month average 465k, 12-month average 512k). After falling by a tenth of a percentage point in July – probably due to the drop in the participation rate – the unemployment rate should remain at 3.5% in August. Wage metrics will be scrutinized by traders to assess how soaring (and widening) consumer prices translate into second-round effects; consensus expects average hourly gains of 0.3% M/M in August, down from July’s 0.5% pace; the average hours of the work week are unchanged at 34.6 hours. The broad macroeconomic theme is how tighter monetary policy (which is a response to higher inflation) will dampen growth in the coming quarters, and the August jobs data is the last official release before the Fed’s September meeting. Money markets are currently torn between whether the Fed will raise rates by 50 basis points or 75 basis points. For what it’s worth, Fed officials have suggested that in the coming months the labor market could cool off from very hot and tight conditions, and recent Fed meeting minutes noted that the labor market implied that the economy was in better shape than in the first quarter. and suggested T2 growth data. (The Fed’s June forecast, which will be updated in September, predicted that the jobless rate would hit 3.7% by the end of this year, rising to 3.9% in 2023, before rising to 4.1% in 2024, above the longer Fed unemployment rate-estimate of 4.0%). Since the release of those minutes, Fed officials have said some cooling in the labor market would be welcome, and labor market data certainly does not suggest the US economy is in recession (Daly); On labor market supply concerns, dovish 2023 voter Kashkari believes labor supply potential is more or less fixed now, while the voting hawk of the Fed in 2022, Bullard, thinks it is even possible that the unemployment rate will drop slightly.

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