Macroeconomics: The Day Ahead for 11 Aug 23

  • UK GDP and activity data tops statistical run; RBA testimony, French Unemployment, Fed speak, China property sector new to digest, US PPI and Michigan Sentiment, Brazil inflation ahead; WASDE, CASDE and IEA Oil market report the focus for commodities; light run of earnings

  • UK GDP: Manufacturing and Construction surge pace June GDP jump, stronger than expected Personal Consumption, Business Investment and Govt spending pace quarterly rise; June data likely a one-off, but still pressures BoE

  • US PPI: energy and trade services seen pacing modest m/m rise, set to confirm pipeline inflation pressures subdued


A busy schedule of data to end the week has UK Q2 GDP and monthly activity data and US PPI as the headliners, with final readings on Singapore Q2 GDP, French and Spanish CPI and RBA semi-annual testimony to parliament to digest (still suggesting rates may rise again, but also saying the ‘worst is over’ on inflation), with Brazil’s IPCA IBGE inflation and US provisional Michigan Sentiment also ahead. A very modest run of corporate earnings features Bechtle and Newcrest Mining, with nothing scheduled in terms of central bank speakers. Another  busy day for key monthly reports in the commodity space with the US WASDE and China CASDE crop S&D accompanied by the IEA Oil Market Report.

Next week has plenty of major data in the US, China and UK, though the peak of the summer holiday season in the northern hemisphere will likely thin activity. The US and China look to Retail Sales and Industrial Production, with the US also seeing NAHB, NY & Philly Fed surveys and Housing Starts, China also has Fixed Asset Investment and Property sector indicators, while the UK has Unemployment & Average Earnings, CPI & PPI and Retail Sales. A light schedule in the EU has the German ZEW survey, Swedish and final Eurozone CPI, while Japan looks to advance Q2 GDP and Trade, with Canada awaiting CPI, and Australia Q2 Wages and monthly Unemployment and RBA minutes. The corporate earnings season winds down, with retailers getting top billing in the US.

** U.K. – Q2 GDP and June activity data **

– Both quarterly and monthly GDP were much stronger than expected at 0.5% q/q and 0.2% m/m, with a 2.4% m/m surge in Manufacturing (vs. forecast 0.2%) and a sharp 1.6% m/m rebound in Construction (vs. forecast flat m/m), contrasting with an as expected 0.2% in the Index of Services accounting for the jump. Given that the June Manufacturing PMI languished at 46.5, and the Construction PMI dropped to 48.9, the official data stand in sharp contrast to surveys, suggesting some quirks and the likelihood that the surge will probably be a one-off. Within the quarterly data, much stronger than expected Govt Spending (3.1% q/q vs. forecast -0.9%), Private Consumption (0.7% q/q vs. forecast flat) and a better than expected flat reading for Gross Fixed Capital Formation (vs. forecast -1.3%), paced by an unexpected 3.1% q/q in Business Investment (forecast -0.9%) accounting for the best quarterly outturn since Q1 2022, with Net Exports still a substantial drag (Exports -2.5% q/q, Imports +1.0%). Caution is due on Business Investment given that prior advance reading strength has been revised lower, or even to negative in final readings. But taken at face value, this will prompt some renewed upward pressure on BoE rate expectations, and all the more so if next week’s wages and CPI data were to turn out above forecast, even if falling relative to June.

** U.S.A. – July PPI **

–  PPI is seen up 0.2% m/m on headline and core, with base effects pushing up headline to a still very low 0.7% y/y from 0.1%, and core edging 0.1 ppt lower to 2.3% y/y. The bulk of the upward pressure in m/m terms will be down to higher oil prices and shipping rates (Panama Canal drought related). But barring a very unlikely jump, markets will take yesterday’s CPI as being the signal that Fed rates have probably peaked, given that PPI should show minimal pipeline pressures.

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