Macroeconomics: The Day Ahead for 12 August

  • Busy day for statistics to end the week: UK Q2 GDP and activity indicators headlines; French Unemployment, Swedish CPI and Malaysia GDP to digest; India CPI and Production, US Import Prices and Michigan Sentiment ahead; US WASDE and China CASDE the focal point for agricultural markets
  • UK Q2 GDP: Platinum Jubilee Bank holiday accounts for much of weakness, extent of July rebound key to any assessment on trend
  • US Import Prices: large drag from strong USD, weaker energy and commodity prices; headline PPI slide imparts some downside risk
  • US Michigan Sentiment: slightly larger rebound expected on gasoline price slide, but still very close to all-time low

EVENTS PREVIEW

The week ends with something of a data and agri monthly reports fest. There are the array of UK Q2 GDP and monthly activity indicators, Swedish CPI, French Q2 Unemployment and Malaysia GDP to digest, while ahead lie Indian CPI and Industrial Production, US Import Prices and provisional Michigan Sentiment. As Europe endures another round of extreme hot weather, and other parts of the world are blighted by drought, hot weather and floods, the USDA’s monthly World Agricultural Supply & Demand (WASDE) report will be scrutinized very closely, and follows China’s equivalent CASDE. The rest of the events schedule is thin, with Peru’s BCRP sticking to its ‘military medium’ pace of rate hikes with another 50 bps to 6.50% overnight, and the Fed’s continued pushback on the markets’ rate trajectory via comments from SF Fed’s Daly to digest, while the corporate earnings schedule is very light.

Next week may be the peak of the summer holiday season in Europe, but has a deluge of statistics from the US and China, which will include Retail Sales, Industrial Production and housing data, and another busy week for the UK with CPI, labour data and Retail Sales, and indeed Canada (CPI, Retail and Manufacturing Sales, and Teranet House Prices), with Japan Q2 prov. GDP and Private Machinery Orders and Australian labour data also on tap . It will be seasonally light in terms of central bank speakers, though there will be July FOMC and August RBA meeting minutes, while US corporate earnings will be dominated by retailers: Walmart, Home Depot, Kohl’s, Lowe’s, Tapestry, Target and TJX inter alia, with Agilent Technologies, Analog Devices, Cisco and Deere & Co also reporting. The week will also get off to a very slow start, with Assumption in many Catholic/Orthodox countries and a raft of other bank holidays around the world.

** U.K. – Q2 and June GDP, monthly activity indicators **

UK Q2 GDP and the array of monthly activity indicators will a) be heavily distorted by June’s two day Platinum Jubilee bank holiday, and b) get kicked around like a tired rather deflated football by the political fraternity, in what will be an abject display of how badly the country’s political leaders are disconnected from the economic realities faced by the general public. June monthly GDP is seen falling -1.2% m/m (prior double bank holidays have seen GDP fall as much as 2.0% m/m), resulting in a 0.2% q/q contraction in Q2 GDP, with health services the ongoing wild card, while the June Index of Services is seen down 1.0% m/m, Industrial Production -1.4% m/m and Construction Output -2.0% m/m. The distortions render any attempt to extrapolate from this the BoE’s rate trajectory irrelevant and unwise, the key question is how the average of monthly GDP readings for June and July turns out.

** U.S.A. – July Import Prices, Aug Michigan Sentiment **

A strong USD, lower energy and commodity prices should prove to be a big drag on Import Prices, which are expected to fall 1.0% m/m (June +0.2%), with the ex-Petroleum measure seen edging down 0.1%, with the risks following on from the sizeable fall in headline PPI and modest core PPI gain being skewed to the downside. Michigan Sentiment is expected to pick up for a second month to 52.5 from July’s final 51.5, but still barely off its June all-time low of 50.0. Lower gasoline prices (now almost $1.0 lower than June’s $5.01 peak) are likely to be the primary driver of this tepid rebound, though the hefty political bias in the survey will continue to weigh heavily in the equation.

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Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

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.

© 2021 ADM Investor Services International Limited.

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