Written Commentary
The Ghost in the Machine Q3 2023
September 19, 2023
Macroeconomics: The Day Ahead for 11 August
- August 11, 2022
- Marc Ostwald
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- UK RICS House Prices, Singapore GDP downgrade, fall in NZ House Prices to digest; US PPI and weekly jobless claims, IEA and OPEC monthly oil markets, US 30-yr and Canada 3-yr sales, and busy run of European earnings ahead; markets on sugar high after US CPI
- US PPI: energy likely to drag more than consensus anticipates, but Services set to keep core elevated
- US weekly jobless claims: further modest upward drift expected, echoing household survey, but still not indicative of major loosening of labour demand
EVENTS PREVIEW
Today’s schedule has all the hallmarks of being relatively busy, but on the other hand likely to elicit little more than a shoulder shrug from summer lulled markets, with yesterday’s US CPI out of the way. There are the UK RICS House Price survey and Turkey’s Current Account to digest, while ahead only US PPI and weekly jobless claims have any real market moving potential. OPEC and the IEA publish their monthly oil market reports, while rate hikes are expected in Serbia (+25 bps) and Mexico (+75 bps). Hapag-Lloyd, Orsted, RWE, Siemens and Thyssenkrupp in Europe and Brookfield Asset Management and JBS in the Americas top the day’s run of corporate earnings, while the US rounds off this week’s quarterly refunding with $21 Bln of 30-yr T-Bonds, and Canada sells 2-yr.
** U.S.A. July PPI, Weekly Jobless Claims **
PPI looks to be past its peak on both headline and core measures in y/y terms, with forecasts looking for a 0.2% m/m gain on headline that would pull the y/y rate down to 10.4% from 11.3%, and given a sharp fall in energy prices in July, the risks look to be to the downside. Core measures are seen up 0.4% m/m, which would see y/y rates fall to 7.7% ex-Food & Energy and 5.9% ex-Food, Energy & Trade, with core Services PPI proving far more stubborn, and unlikely to ease significantly in the near future. Nevertheless any downside miss following the lower than expected, but still very high CPI will continue to feed into a more benign market view on the Fed rate trajectory. Perhaps the key point after the jobs and inflation data is that market views on rates remain fluid and fickle, fuelling already high volatility, and it should be added that it will require at least two more months of softer inflation prints, before the aggressive Fed rate rhetoric becomes quiescent.
As for weekly jobless claims, these are expected to edge up again to 265K from 260K, running counter to the robust Payrolls signal, but echoing the moderate weakness seen in the Household Employment data in the past two months. However the low participation rate underlines that this does not really resolve skills shortages without a much bigger surge in claims (and the attendant recession implications). It’s also worth noting on CPI, 5 further months of zero m/m headline readings only gets headline to 6.3% y/y by year end.
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ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
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