- Tuesday: UK Labour Market report, German ZEW, US NFIB Small Business Optimism Index.
- Wednesday: Japan PPI, UK GDP, EZ Industrial Production, US CPI.
- Thursday: Australia Labour Market report, Japan Industrial Production, Switzerland PPI, ECB Policy Decision, US Jobless Claims, US PPI, US Retail Sales.
- Friday: NZ Manufacturing PMI, China Industrial Production and Retail Sales, Eurozone Wages data, US University of Michigan Consumer Sentiment.
The UK Unemployment Rate is expected to rise to 4.3% vs. 4.2% prior, but the market will likely focus more on the wages data which is seen matching the prior readings with the Average Earnings ex-Bonus at 7.8% and Average Earnings incl. Bonus at 8.2%. The September rate hike is basically a done deal at this point, so this report should influence the market pricing beyond September.
The US Headline CPI Y/Y is expected to rise to 3.6% vs. 3.2% prior, while the M/M reading is seen at 0.6% vs. 0.2% prior. The jump in Headline CPI is due to higher energy prices, which should be temporary, in fact the Fed is focused on the Core measures. The Core CPI Y/Y, which excludes the volatile food and energy prices, is expected to fall to 4.3% vs. 4.7% prior, while the M/M figure is seen again at 0.2% vs. 0.2% prior. Unless this report is uncomfortably hot all around, it’s unlikely to change the market’s pricing for the September meeting, which sees the Fed to hold rates steady. In fact, the debate now is more about the November decision, and most importantly when the Fed will start to cut rates.
The ECB is expected to keep the deposit rate steady at 3.75%, but in reality, it’s more of a coin toss with the rate hike probability standing around 60%. The data has been surprising to the downside lately and the deterioration has been fast. Inflation and labour market indicators though are still strong, and the central bank may fear that it might take too much time to get back to the 2% target. In fact, the longer high inflation stays in the system, the higher the chances that inflation expectations de-anchor and the harder it will be to bring it down later.
The US Jobless Claims remains a key weekly labour market indicator and it’s been showing continued strength with the data last week beating expectations by a big margin. This week the consensus sees Initial Claims at 226K vs. 216K prior, while Continuing Claims are seen at 1693K vs. 1679K prior.
Chinese Industrial Production Y/Y is expected at 4.0% vs. 3.7% prior, while Retail Sales Y/Y are seen at 2.8% vs. 2.5% prior. The data will show how the activity in the second largest economy in the world is faring after many big misses the last month.
The University of Michigan Consumer Sentiment is expected to fall to 69.2 vs. 69.5 prior. The prior final report was revised downwards from the preliminary readings, in line with the big miss in the Conference Board Consumer Confidence report. The UMich survey is more weighted towards consumers finances, while the Conference Board towards the labour market sentiment. Therefore, given the higher energy prices, we can expect a lacklustre report and probably higher inflation expectations.