Macroeconomics: The Day Ahead for 02 August

The US monthly labour data are front and centre on what is a modest run of data to end the week, while Big Oil behemoths ExxonMobil and Chevron top the day’s earnings run. There are Korean CPI, French Industrial Production and Spanish Unemployment to digest, while ahead lie Italian Industrial Production and Retail Sales, and US Factory Orders. BoE chief economist Pill (who dissented in favour of no change yesterday) is the sole central speaker. Other corporate earnings likely to attract attention includes Sumitomo Mitsui and Titan Company in Asia, Engie and International Consolidated Airlines Group in Europe, Fluor, Linde and Imperial Oil in North America.  Next week’s schedule is relatively light, dominated by Services PMIs/ISM and trade data from China, Germany, US, Japan and Canada, with China also seeing CPI & PPI, the US Fed’s Q3 Senior Loan Officer survey, Japan Wages and Household Spending, German Orders and Production, Canada Unemployment, UK BRC Retail Sales and RICS survey, Brazilian and Mexican inflation. The RBA and RBI are expected to hold rates at their policy meeting, and a light run of central bank speakers. Corporate earnings will again be plentiful, with highlights likely to include: Allianz, Bayer, Bharti Airtel, Caterpillar, Eli Lilly, Glencore, Honda Motor, Infineon, Japan Post, Novo Nordisk, NT&T, Petrobras, Saudi Aramco, Siemens, SMIC, Sony, Tokyo Electron, Tokio Marine, Uber, Walt Disney, Yum! Brands and Zurich Insurance.

** U.S.A. – July Non-farm Payrolls, Unemployment & Average Hourly Earnings **

– Payrolls are seen lower in headline terms at 175K (vs. June 206K), but Private Payrolls slightly higher at 140K (vs. June 136K), with some impact expected from Hurricane Beryl, which along with the seasonal volatility has seen some relatively large swings in weekly jobless claims. The run of monthly and quarterly labour market indicators has been mixed, with JOLTS Job Openings net of revisions suggesting that labour demand is cooling, but not as rapidly as some have suggested, though the fresh lower in Consumer Confidence Labour Differential should be borne in mind, even if the equity market sell-off suggests rising concern about the economic outlook (though in truth more reflective of all the concentration risks and portfolio imbalances that many have highlighted). Q2 ECI and Unit Labour Costs both confirmed some moderation in wage growth, close to levels that would be considered ‘normal’ (nigh on impossible to pin down in a rapidly changing economy). As importantly the Unemployment Rate is seen steady at 4.1%, while Average Hourly earnings are forecast at unchanged 0.3% m/m and 4.1% y/y, also keeping the 3-mth annualized pace at 4.0%, not quite as low as the Fed would want. The Participation Rate remains a wildcard, above all due to immigration flows, given that migrant participation in the labour force is estimated to be around 2.0 ppt higher than native.  As such, while markets will inevitably perform their usual hysterical dance in reaction to the headlines, and perhaps get checked by revisions, the overall report however will require a more in-depth inspection to form any judgement about underlying changes in trends.