Main Macro Events This Week
United States: The economic calendar starts off gradually with the release of the Dallas Fed index (Monday), seen rising to -10.0 in July from -18.3. S&P/Case-Shiller home prices are set to rise to 1.5% to 189.5 in May (Tuesday), followed by Market services flash PMI and consumer confidence, expected to dip to 96.0 in July vs 98.0 in June. Also on tap are new home sales forecast to sink 0.7% to 547k in June from 551k. The MBA mortgage market index is on deck (Wednesday) along with durable goods orders, which are forecast to drop 0.5% in June vs -2.3% in May. NAR pending home sales are seen flat in June, while the EIA oil inventory report could swing oil prices. The trade deficit may sport a -$60.5 gap in June (Thursday), little different from May; initial jobless claims may rebound 9k to 262k for the week ending July 23. Advance Q2 GDP is the main headliner (Friday), forecast to rise 2.7% and the Survey Median shows a 2.6% growth rate, more than double the 1.1% pace of Q1. Q2 ECI may tick up 0.4% vs 0.6% in Q1, or 2.2% on a y/y basis, while Chicago PMI is set to drop to 53.0 in July vs 56.8 and Michigan sentiment steadies at 89.5 in July.
FOMC preview: Expected to maintain a steady policy stance at its 2-day meeting. The tone of the statement released Wednesday will be scrutinized for insights on the policy path over the rest of the year. The outlook should be biased to optimistic side give the improved data, which support forecasts for Q2 GDP of about 2.7%, and as the markets have recovered from the initial Brexit gyrations. But it’s not clear whether those factors will change policymaker outlooks, or merely conform to their views. Yellen and others, including the more hawkish members, have shown a strong preference toward caution and that’s not likely to change for now. Yet risk is for a more hawkish statement than expected as the outlook on the labor market is likely to be upgraded versus June’s, which noted some slowing in the improvement. The Fed may start to nuance its verbiage toward more confidence in rising inflation pressures, but that may not be seen yet. We also don’t expect any specific mention of Brexit, though its potential bearish effects could be couched in terms of general “global economic and financial developments,” which the Fed will continue to monitor.
Canada: A thin calendar ends with a flourish this week, as the definitive May GDP report (Friday) will detail the impact of the Fort McMurray wildfire on the national economy. We expect GDP to plunge 0.4% m/m in May after the 0.1% gain in April. The industrial product price index (IPPI), also due Friday, is expected to rise 0.5% (m/m, nsa) in June after the 1.1% surge in May. Average weekly earnings (Thursday) are projected to gain 0.1% m/m in May after the 0.3% drop in April. The CFIB’s Business Barometer for July (Thursday) it improved to 60.0 in June after falling to 58.2 in May from 59.2 in April.
Europe: The data packed week will be somewhat anti-climactic after Draghi confirmed the central bank’s wait and see stance. German Ifo Business Climate index (Today), where we are looking for a dip in the overall reading to 108.2 from 108.7. The European Commission’s ESI Economic Confidence indicator is seen falling back to 104.0 from 104.4. Preliminary Q1 GDP numbers from France,
Spain and for the Eurozone as a whole are expected to show growth of just 0.1% q/q in France, 0.4% q/q in Spain and a slowdown to 0.3% for overall Eurozone GDP as a whole. Overall Eurozone unemployment is seen steady to 10.1% in June, while the more timely German jobless number for July is expected to leave the jobless rate unchanged at a very low 6.1%. Inflation is rising lowly we are looking for a slight rise in German prel HICP inflation to 0.3% y/y in July from 0.2% y/y and a rise to 0.4% y/y from 0.3% y/y in France, which together with an equally slight uptick in the Spanish headline rate should bring the overall Eurozone HICP (Friday) to 0.2% y/y from 0.1% y/y.
UK: The July editions of the CBI industrial trends and distributive sales (a measure of retail and wholesale activity) surveys, along with the July Gfk consumer confidence, will provide the post-Brexit snapshots this week. The Industrial trends survey (Today) is likely to ebb to -6 reading from +2. Distributive sales (Wednesday) is seen falling to +1 in the headline realized sales figure, from +4. The July Gfk consumer confidence (Friday) has us expecting a dive to -6 from -1 in June. The first estimate of Q2 GDP (Wednesday), which we expect at +0.5% q/q and +2.1% y/y. The report will be too Brexit to be of much interest. June BBA mortgage approvals (Tuesday) are seen ebbing to 39.5k from May’s 42.2k, which would continue the unwind seen since April, when a tax hike on investment property transactions was imposed. Monthly BoE lending data for June are also up (Friday).
China: June leading indicators are due Thursday.
Japan: June services PPI (Tuesday) are seen at up 0.1% y/y from the 0.2% prior increase. The balance of the busy schedule comes on Friday, beginning with CPI data, where national June headline prices are seen falling to -0.5% y/y from -0.4%, and core prices expected down 0.5% from -0.4% in May. Tokyo July CPI is expected unchanged at -0.5% for both overall and core readings. June unemployment is forecast unchanged at 3.2%, while the job offer/seeker ratio is penciled in at 1.37 from 1.36. June personal income is on tap, along with June PCE, which is expected down 0.5% y/y from May’s -1.1% outcome. June industrial production likely rose 0.2% y/y versus the sharp -2.6% reading in May. June retail sales are forecast at -1.7% y/y for large retailers from May’s -2.1%, and -1.5% y/y overall, as compared to the previous -1.9% outcome. June housing starts are seen falling 5.0% y/y from the 9.8% increase in May. June construction orders are also due.
The BoJ announces its policy decision on Friday following its 2-day meeting. We expect a mix of easing measures from both the monetary and fiscal sides of the ledger, which may include infrastructure spending, and expansion of asset purchases, including corporate bonds and ETFs.
Australia: CPI (Wednesday) is expected to rise 0.3% q/q in Q2 after the 0.2% drop in Q1 that triggered the May rate cut to 1.75% from 2.00%. But the annual growth rate should slow to 1.0% in Q2 from 1.3% in Q1, which in our view would strongly suggest another rate cut from the RBA in August. Other inflation data is out this week. Trade prices for Q2 (Thursday) are projected to show a 3.5% gain in import prices (q/q, sa) and a 0.5% dip in export prices. The PPI (Friday) is expected to rise 0.2% (q/q, sa) in Q2 after the 0.2% drop in Q1.
Janne Muta
Chief Market Analyst
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