As many traders quietly leave for summer break soaking up even more liquidity as they go, a busy US calendar unfolds in the week ahead, with ISM, PCE price data and, of course, payrolls in the spotlight.
Key Events, courtesy of RanSquawk
- Monday: Eurozone CPI (Jul, P), China Official PMIs (Jul)
- Tuesday: RBA MonPol Decision, Eurozone GDP (Q2, Initial)
- Wednesday: ADP, Fed’s Mester, Williams speak
- Thursday: BoE MonPol Decision, Meeting Minutes & Quarterly Inflation Report
- Friday: US Labour Market Report (Jun), Canadian Labour Market Report (Jun), RBA SoMP
In North America, June’s US Labor Market Report headlines the docket next week. Analysts expect the Nonfarm Payrolls headline to print at 187,000, with the unemployment rate expected to tick down to 4.3%, while hourly earnings are expected to remain subdued. The H1 average for the Nonfarm Payrolls release sits at 180,000. Following its latest statement, the Federal Reserve noted that “job gains have been solid, while household spending and business fixed investment have continued to expand.” The main worry is wage growth, which has remained muted, and is perhaps keeping a lid on the Federal Reserve’s hiking cycle at present, as inflation has been kept in check.
Friday will also bring the Canadian labour market report for July. Analysts looks for 14,500 jobs to have been added, although they do expect that the unemployment rate will remain steady at 6.5%. Following a string of hot labour market reports the Bank of Canada stated that “the robust labour market” was underpinning economic growth, as it hiked its key interest rate by 25bps at its most recent decision. In front of this specific print, RBC highlight that “July numbers have traditionally been affected by large fluctuations in the education sector; however, these swings have been smaller in the last two years and we assume little impact from education hiring this month.” Looking forwards RBC suggest that “broadly speaking, employment growth is expected to moderate alongside slower – albeit still above-trend – GDP growth.”
Other releases of note during the week: Tuesday US ISM manufacturing survey (Jul) Wednesday US ADP Employment Report (Jul) Thursday US ISM manufacturing survey (Jul) Friday Canadian Trade Balance (Jun)
Across the G-10 spectrum, announcements from the RBA & BOE will keep FX volatile, even if both banks are expected to remain on hold.
Here are the details from Bank of America and RanSquawk, laying out the US summer data bonanza week:
- We have a busy US calendar ahead, with ISM – both manufacturing and non-manufacturing – PCE price data and Friday’s employment report all in the spotlight. Consensus expects July NFP growth around 187k, unemployment holding at 4.3% and wages up 0.3% m/m, but down to 2.4% y/y growth. June core PCE inflation is likely to print only 0.1%, leaving the y/y rate unchanged at 1.4% and the ISM manufacturing index should edge down to 57.0 in July from 57.8. See our US Economic Weekly for full details.
- In G10 Central Banks: RBA and BOE on hold: The RBA can afford to be patient and any case for normalization of policy will take time to build, with recent AUD strength adding to the case for caution. The RBA will be slower and more gradual than other central banks. In the UK, hawkish expectations for the Bank of England beat a retreat in the face of a smorgasbord of soft data. Expect a 6-2 vote to keep rates on hold and little disagreement with the market rate profile.
- The Bank of England (BoE) convenes for its quarterly ‘Super Thursday’ event this week, where it will issue its latest monetary policy decision, the minutes from the meeting, and its quarterly inflation report. While almost all of those surveyed expect the BoE to stand pat, analysts at Nomura are looking for a 25bps hike, although they do assign a 40% probably of the Bank remaining on hold. The last decision yielded a surprising 5-3 vote, although Forbes’ (a hawkish dissenter) term has now come to an end. Analysts expect dissenters McCafferty and Saunders to vote for a 25bps hike once again, with focus falling on chief economist Andy Haldane following a hawkish intra-meeting speech. As a result, analysts will focus on whether the vote split is 6-2, or 5-3, with newcomer Tenreyro expected to side with the majority this time out. With UK consumers’ pockets feeling the squeeze of higher inflation Barclays remain “confident that the bank will maintain the monetary status quo over the foreseeable future.” It is probably fair to say that the Bank’s most recent inflation report was a little optimistic, and that the UK’s economic condition has deteriorated in Q2. As a result eyes will fall on the Bank’s growth projections, while the inflation outlook could be driven by a lower trade weighted sterling and a modest recovery in oil prices. The Bank’s assessment of the labour market will also be key as it grows ever tighter, with wage growth remaining subdued.
- July’s PMI releases will also garner interest. The manufacturing survey is due on Tuesday, while its services counterpart is scheduled to be released on Thursday. In the wake of last month’s surveys Markit noted that “a slowing in services sector growth completed a triple-whammy of disappointing PMI survey readings. Although the three PMI surveys are running at levels that are historically consistent with GDP growing by around 0.4% in the second quarter, it’s clear that the economy heads into the third quarter losing momentum. The indications are that the economy’s resilience is being tested. There are pockets of growth, notably in financial services and business services, but the overall picture is one of business spending, investment and exports failing to provide sufficient impetus to fully offset the consumer slowdown. Given the deterioration in the forward-looking indicators, such as business optimism and order book growth, the risks are tilted towards the economy slowing in the third quarter.”
- The week ahead in Emerging Markets: There are monetary policy meetings in India, Czech Republic, Romania and Ukraine. We forecast India’s RBI to cut 25bp. Czech Republic CNB will likely hike 20bp. Sovereign rating review in Israel and Kuwait. We also get China PMIs.
We next look at the global economic calendar on a daily basis courtesy of DB’s Jim Reid.
- Monday we have German retail sales (+0.2% mom expected; +0.5% previous) and UK consumer credit data for June due, followed by the Eurozone unemployment rate (9.2% expected) for June and CPI estimate (+1.3% YoY expected) for July. In the US we will get the Chicago PMI number (60 expected; 65.7 previous), the Dallas Fed manufacturing activity reading (13 expected; 15 previous) for July and June pending home sales (1% expected).
- Tuesday kicks off in Asia where we will get the Caixin China manufacturing PMI reading and the final Nikkei Japan manufacturing PMI reading for July. In Europe we will get July data for the UK Nationwide House Price index, followed by a first look at the remaining manufacturing PMIs out of Europe and the final July manufacturing PMIs for France, Germany and the Eurozone as a whole. We will also get the advance estimate for Q2 Eurozone GDP. In the US we will get personal income and spending numbers for June and the ISM manufacturing PMI for July.
- Wednesday is a quiet day in both the Europe and the US with no real data of note outside of ADP and the Eurozone PPI. Thursday’s calendar will round out July PMI data for the week. In Asia we will get the July composite and services PMI numbers for China (Caixin) and Japan (Nikkei). In Europe we get the July PMIs with the final services and composite PMIs for France, Germany and the Eurozone due as well as a first look at some of the same data for the rest of Europe. Thereafter all focus should shift to the BoE policy meeting. Over in the US we should also get jobless claims data followed by the ISM non-manufacturing composite for July. Thereafter we will get factory orders data as well as the final readings for durable and capital goods orders for June.
- Friday is relatively quiet day for data in both Asia and Europe with only German factory orders data for June due. The US should be in greater focus as the July payrolls number is due along with other labour market data. Alongside that we will also get the trade balance reading for June.
Other notable events: on Tuesday, trade ministers from the BRICS countries will meet in Shanghai. Then Wednesday, the Fed’s Mester will speak at a Community banking conference and the Fed’s Williams will speak in Las Vegas on monetary policy. For Thursday, ECB will publish its economic bulletin and the Baker Hughes US rig count will out on Friday. Finally, notable US companies due to report include: Apple, Pfizer, Tesla, Berkshire Hathaway. Closer to home, we also have HSBC, Heineken, BP, ING Groep, Siemens, BMW and Swisss Re due to report.
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Finally, here is Goldman focusing on the US with key events and consensus estimates for every event:
The key economic releases this week are the personal income and spending and ISM manufacturing reports on Tuesday, and the employment report on Friday. There are a few scheduled speaking engagements by Fed officials this week.
Monday, July 31
- 09:45 AM Chicago PMI, July (GS 58.5, consensus 60.0, last 65.7): We expect the Chicago PMI to moderate to 58.5 following a 7.3pt jump in June to a 3-year high. The index has risen sequentially over the last five months and is likely to remain at a level consistent with solid growth in the manufacturing sector.
- 10:00 AM Pending home sales, June (GS +0.5%, consensus +1.0%, last -0.8%): Regional contract signings data released so far were mixed in June, and we estimate pending home sales rebounded 0.5%, following an 0.8% decline in the May report. We suspect some of the May weakness reflected the lagged impact of higher mortgage rates, the impact of which may have peaked. We have found pending home sales to be a useful leading indicator of existing home sales with a one- to two-month lag.
- 10:30 AM Dallas Fed manufacturing index, July (consensus +13.0, last +15.0)
Tuesday, August 1
- 8:30 AM Personal income, June (GS +0.2%, consensus +0.4%, last +0.4%); Personal spending, June (GS +0.1%, consensus +0.1%, last +0.1%); PCE price index, June (GS +0.05%, consensus flat, last -0.1%); Core PCE price index, June (GS +0.14%, consensus +0.1%, last +0.1%); PCE price index (yoy), June (GS +1.47%, consensus +1.3%, last +1.4%); Core PCE price index (yoy), June (GS +1.53%, consensus +1.4%, last +1.4%): We estimate a 0.2% increase in personal income and a 0.1% increase in personal spending (nominal, mom sa) in June. Based on details in the PPI and CPI reports as well as the firmer price-related news in Friday’s GDP report, we forecast that the core PCE price index rose 0.14% month over month in June and was up 1.53% from a year earlier. Additionally, we expect that the headline PCE price index rose 0.05% and was up 1.47% from a year earlier.
- 09:45 AM Markit US manufacturing PMI, July final (consensus 53.1, last 53.2)
- 10:00 AM ISM manufacturing, July (GS 56.8, consensus 56.4, last 57.8): We expect the ISM manufacturing index to decline 1.0pt to 56.8 in the July report. Regional manufacturing surveys were weaker on balance in July, with declines in the Empire State, Philly Fed, and Kansas City manufacturing surveys. However, the Richmond Fed and Markit PMI manufacturing surveys both moved higher. On net, our manufacturing survey tracker—which is scaled to the ISM index—fell 0.9pt to 56.8 in July.
- 10:00 AM Construction spending, June (GS +0.5%, consensus +0.5%, last flat): We expect construction spending to rebound 0.5% in June following a below-consensus May report, which showed declines in both private residential and private nonresidential spending.
- 4:00 PM Total vehicle sales, July (GS 17.1mn, consensus 16.8mn, last 16.4mn): Domestic vehicle sales, July (GS 13.4mn, consensus 13.0mn, last 12.8mn)
Wednesday, August 2
- 08:15 AM ADP employment report, July (GS +195k, consensus +190k, last +158k): We expect a 195k increase in ADP payroll employment in July, reflecting a boost from the stronger headline payrolls growth in June utilized in the ADP model. We expect an additional modest boost from net strength in the financial and economic indicators also used in the model. The ADP report introduced methodological changes last fall and now offers more details by sector. While we believe the ADP employment report holds limited value for forecasting the BLS’s nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises.
- 11:00 AM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Federal Reserve President Loretta Mester will give the keynote speech at the Community Bankers Association of Ohio’s Annual Convention in Cincinnati, Ohio.
- 01:30 PM San Francisco Fed President Williams (FOMC non-voter) speaks: San Francisco Fed President John Williams will give a speech titled “Monetary Policy’s Role in Fostering Sustainable Growth” in Las Vegas, Nevada. Audience and media Q&A is expected.
Thursday, August 3
- 08:30 AM Initial jobless claims, week ended July 29 (GS 235k, consensus 240k, last 244k); Continuing jobless claims, week ended July 22 (consensus 1,955k, last 1,964k): We estimate initial jobless claims fell by 9k to 235k in the week ended July 29. Initial claims can be particularly volatile around this time of year due to annual summer auto plant shutdowns, and we believe the prior week’s larger than expected increase likely reflected a number of plant closures. Additionally, we expect some retracement from elevated levels of claims in California. Continuing claims – the number of persons receiving benefits through standard programs – likely declined in the week ending July 22.
- 09:45 AM Markit US services PMI, July final (consensus 54.2, last 54.2)
- 10:00 AM ISM non-manufacturing index, July (GS 57.0, consensus 56.9, last 57.4): Regional service sector surveys were mostly weaker in July, and we expect the ISM non-manufacturing index to pull back 0.4pt to 57.0 in July. The New York Fed, Richmond Fed, and Philly Fed surveys all deteriorated month-over-month in July, while the Markit PMI services survey was flat in the flash estimate. Our non-manufacturing survey tracker decreased 1.5pt to 54.2, but continues to suggest expansion in business activity.
- 10:00 AM Factory orders, June (GS +2.6%, consensus +2.8%, last -0.8%); Durable goods orders, June final (consensus +6.0%, last +6.5%); Durable goods orders ex-transportation, June final (last +0.2%); Core capital goods orders, June final (last -0.1%); Core capital goods shipments, June final (last +0.2%): We estimate factory orders rose 2.6% in June – following an 0.8% decrease in May – reflecting a sharp rise in commercial aircraft orders. Despite positive revisions, the June durable goods report showed a modest decline in core capital goods orders but a rise in core capital goods shipments.
Friday, August 4
- 8:30 AM Nonfarm payroll employment, July (GS +190k, consensus +180k, last +222k); Private payroll employment, July (GS +190k, consensus +181k, last +187k); Average hourly earnings (mom), July (GS +0.3%, consensus +0.3%, last +0.2%); Average hourly earnings (yoy), July (GS +2.4%, consensus +2.4%, last +2.5%); Unemployment rate, July (GS 4.3%, consensus 4.3%, last 4.4%): We estimate nonfarm payrolls rose 190k in July, following a 222k increase in June and compared to three- and six-month moving averages of 194k and 180k, respectively. Labor market fundamentals remained solid – business employment surveys remain at strong levels, and the Conference Board’s labor market differential rose to a 16-year high – though we note some modest deterioration in jobless claims data. July payroll growth has been relatively firm in recent years – rising by more than 200k in July in each of the last three years. This trend may reflect changing seasonality in labor market flows and hiring rates in the month, and to the extent the seasonal factors have lagged such an evolution, this would suggest scope for above-trend job growth in the upcoming report as well. We expect the unemployment rate to edge down to 4.3%. The June unemployment rate barely rounded up (at 4.357%), and we believe solid overall job creation will more than offset a modest rise in continuing claims between the survey period. Finally, we expect average hourly earnings to increase 0.3% month over month and 2.4% year-over-year, reflecting somewhat favorable calendar effects.
- 08:30 AM Trade balance, June (GS -$44.1bn, consensus -$44.8bn, last -$46.5bn): We estimate the trade deficit narrowed by $2.4bn in June. The Advance Economic Indicators report last week showed a narrower goods trade deficit, and we forecast a similar narrowing in the broader trade balance in this week’s report.
Source: BofA, DB, GS, RanSquawk
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