- Monday: UK Bank Holiday, Australian Retail Sales.
- Tuesday: Japan Unemployment Rate, US Consumer Confidence, US Job Openings.
- Wednesday: Australia CPI, US ADP.
- Thursday: Japan Retail Sales, Chinese PMIs, ECB Minutes, Eurozone CPI, Eurozone Unemployment Rate, US Jobless Claims, US Core PCE.
- Friday: Swiss CPI, US NFP, US ISM Manufacturing PMI.
The US Consumer Confidence has been sizzling up in the past few months as the consumers continue to see a strong labour market, higher real wages, and lower inflation. Compared to the University of Michigan Consumer Sentiment, which shows more how the consumers see their personal finances, the Consumer Confidence shows how the consumers see the labour market. The consensus sees the index at 116.0 in August vs. 117.0 in July.
The labour market data is now the top priority for the Fed and the markets as a softer labour market is what is seen as needed to reach the 2% inflation target sustainably. After reaching the peak in May 2022, Job Openings have been trending lower although they are seen as still too high. The consensus sees Job Openings decreasing to 9.465M in July vs. 9.582M in June.
The monthly Australian CPI Y/Y data is expected to show further disinflation with the consensus looking at 5.2% in July vs. 5.4% in June. The latest RBA Meeting Minutes showed that the central bank prefers to remain on hold and given the recent weaker data like the Employment Report, it looks like only a notable beat can stir the RBA from this path.
The US ADP continues to be pretty useless in forecasting the US NFP, but the market keeps on reacting to it, nonetheless. The consensus sees 195K new hires in August vs. 324K in July.
The Chinese Manufacturing PMI is expected to tick higher to 49.5 vs. 49.3 prior, while there’s currently no consensus on the Services reading although it was 51.5 in July. The Chinese economy has been struggling for quite some time and, despite promises of more support from the authorities, the market interpreted the latest actions as not enough.
The Eurozone CPI Y/Y is expected to move lower to 5.1% vs. 5.3% prior, while the M/M figure is seen at -0.1% vs. -0.1% prior. The Core CPI Y/Y is expected at 5.3% vs. 5.5% prior. There’s a growing sentiment among the ECB members that downside risks have materialised, and it requires a more careful assessment on the policy front. The market sees a 50/50 chance for a 25 bps hike at the September meeting and this report should decide what we will likely see at the next policy decision. The Unemployment Rate is seen unchanged at 6.4%.
The US Jobless Claims remain a key leading indicator for the labour market, and they’ve been signalling continued strength. The consensus sees Initial Claims at 235K vs. 230K prior, while Continuing Claims are expected at 1709K vs. 1702K prior.
The US PCE Y/Y is expected at 3.3% vs. 3.0% prior, while the M/M figure is seen at 0.2% vs. 0.2% prior. The Core PCE Y/Y, which is the Fed’s preferred inflation measure, is expected at 4.2% vs. 4.1% prior, while the M/M reading is seen at 0.2% vs. 0.2% prior. I don’t expect this report to be market moving given that the market is more focused on the more timely CPI data.
The Switzerland CPI Y/Y is expected to move lower to 1.5% vs. 1.6% prior, while the M/M figure is seen at 0.2% vs. -0.1% prior. As a reminder, the inflation rate in Switzerland is already in the SNB’s 0-2% target band on both the headline and core measures, but the central bank maintains its hawkish stance wary of upside risks. Nonetheless, the market sees the SNB to remain on hold at the next meeting.
The main event of the week will be, of course, the US NFP report. The consensus sees 170K jobs added vs. 187K prior with the Unemployment Rate remaining unchanged at 3.5%. The Average Hourly Earnings Y/Y is seen at 4.4% vs. 4.4% prior, while the M/M figure at 0.3% vs. 0.4% prior. This report coupled with the US CPI in two weeks will decide if the Fed will hike or pause at the September meeting, as per their words they will “decide on the totality of the data”. In my opinion, given the Fed’s particular focus on the labour market, in case we get a hot report, the market is likely to anticipate a hawkish reaction without waiting for the CPI data.
The US ISM Manufacturing PMI is expected to tick a little higher to 46.6 vs. 46.4 prior. The US S&P Global Manufacturing PMI missed expectations by a big margin last week, so the sentiment going into this report is likely to be skewed to the downside. There should also be particular attention to the employment sub-index which tumbled to cycle lows in the prior report.