The Main Macro Events This Week

United States: FOMC Forecast revisions to be released Wednesday after the FOMC meeting should reveal little change in the official GDP and jobless rate estimates from the March meeting, which remain consistent across the forecast horizon with available growth and jobs data. The US economic calendar will have a few last-minute releases that may inform the Fed decision this week, but none sufficient to provide a counter-weight to the tepid May employment report that temporarily curbed the Fed’s appetite for a hike. Among them are the May retail sales report (Tuesday), which may log a healthy 0.6% gain (median 0.3%) vs 1.3% in April. Import prices are set to rise 1.0% in May, compared to a 0.2% gain in export prices. Business inventories are on tap too, expected be unchanged in April (median 0.3%) vs 0.4%. MBA mortgage market applications (Wednesday) are due, followed by an update on PPI set to rise 0.4% (median 0.3%) or -0.1% core. Empire State is seen flat for June (median -0.4) vs -9.0 in May, still not very inspiring, while industrial production may sink 0.2% in May (median unchanged) and capacity use slip to 75.2% from 75.4%. CPI is forecast to rise 0.2% for both headline and core in May (Thursday) and a 1.1% y/y reading won’t rattle the Fed. Philly Fed may resurface to 2.0 in June (median 0.7%) from -1.8, while the current account narrows to -$124.6 bln in Q1 from -$125.3 bln in Q4. Jobless claims are forecast to snap back 16k to 280k, while the NAHB housing market index may tick up to 59 in June from 58. Housing starts may sink 0.2% to 1,170 (Friday).

Canada: In Canada, the April manufacturing report and May CPI release highlight this week’s calendar, which also has appearances from Governor Poloz and Senior Deputy Governor Wilkins. April manufacturing, due Wednesday, is expected to reveal a 1.0% rebound in shipment values following the 0.9% drop in March. Total CPI, due Friday, is seen expanding at a 1.7% annual pace in May following an identical 1.7% y/y gain in April. But total CPI is seen jumping 0.6% m/m in May after the 0.3% gain in April, as higher gasoline prices and depreciation of the Canadian dollar both conspire to drive the index higher relative to April. The Bank of Canada’s core CPI index is projected to expand at a 2.2% y/y pace in May, matching the 2.2% rate in April. But here too we see acceleration in the monthly growth rate, with core CPI seen expanding 0.5% m/m in May after the 0.2% gain in April. Existing home sales for May (Wednesday) and the May Teranet/National home price index (Tuesday) also feature this week. BoC Governor Poloz speaks (Wednesday) at the Yukon Chamber of Commerce, Whitehorse, YT. A press conference will follow the speech. BoC Senior Deputy Governor Wilkins speaks (Friday) to the Canadian Payments Association in Calgary. There is not a press conference.

Europe: Eurozone Finance Ministers will meet again this week and Greece will hope to finally fully complete the bailout review, which would also open the way for the ECB to consider re-instating the waiver on Greek government bonds. This would allow Greek banks to participate in the central bank’s regular refinancing operations and be another step back towards normality. The events calendar also has a German 10-year Bund auction on Wednesday as well as the ECB’s economic bulletin on Thursday and several ECB speakers including Draghi (Friday). The overall message is likely to be the same, namely that the ECB is on hold while keeping the door open for further action if necessary. Data releases won’t change the overall outlook. There is a bunch of final May HICP numbers, with the overall Eurozone reading expected to be confirmed at -0.1% y/y (median same), and core inflation at 0.8% y/y. The ECB already had preliminary numbers at the time of the last meeting and is confident that current measures are sufficient to bring inflation back on a gradual growth path. The Eurozone also has trade numbers, BoP data and industrial production numbers for April. Production is expected to have rebounded slightly and we are looking for a marginal widening of the trade surplus, but overall data are unlikely to change expectations for a slowdown in overall GDP growth in the second quarter of the year.

United Kingdom: In the shadow of the EU vote, the week’s BoE June policy meeting and data calendar won’t carry as much significance as would usually be the case. The BoE’s MPC (announcing Thursday) will more than likely leave the repo rate at 0.5% by unanimous vote, and we don’t expect much deviation in the tone of the minutes to those of last month, nor last month’s edition of the quarterly Inflation Report. UK inflation data (Tuesday) has us expecting a 0.4% y/y reading on headline CPI (median same), up on April’s 0.3% y/y. This would still be below the 0.5% y/y cycle peak that was seen in March. Labour data covering April and May are also up (Wednesday), where we expect an unchanged unemployment rate of 5.1% (median same). Retail sales for May (Thursday) should show a rebound from April weakness. We expect a 3.7% y/y gain versus the -0.9% figure seen in April.

China: In China, May industrial production (today) came in unchanged compared to the 6.0% y/y April result. May retail sales (today) dipped to 10.0% y/y from 10.1% y/y in April. Foreign direct investment (today) dropped to 3.8% y/y clip in May versus 4.8% previously. Money supply figures are expected during the week.

Japan: Japan kicked the week off with the June MoF business outlook survey (BSI Manufacturing Index), which dropped to -11.1, versus the -7.9 reading seen in May. Revised April industrial production (Tuesday) is seen steady at 3.8% y/y. The BoJ is expected to keep policy unchanged at its meeting which culminates on (Thursday). Improved incoming domestic data, including upgraded Q1 GDP, stronger production, and a delay in the increase in the national sales tax proposed for April 2017 should be enough to keep the Bank on hold for now, while Governor Kuroda will likely want to further assess the impact of negative interest rates before easing further. The Q2 Tankan report, due June 30, may give him the data he needs on that front.

Australia: In Australia, Reserve Bank of Australia Assistant Governor (Financial Markets) Debelle delivers remarks (Tuesday) at the ASIFMA-GFMA Market Liquidity Conference 2016 in Hong Kong. His appearance will be via video link. Deputy Governor Lowe delivers a speech (Thursday) at the Economic Society of Australia (QLD) Business Lunch in Brisbane. Economic data features May employment (Thursday), expected to reveal a 10.0k gain following the 10.6k rise in April. The unemployment rate is seen at 5.7% in May, matching April.

Janne Muta

Chief Market Analyst

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