Macroeconomics: The Day Ahead for 15 September

A raft of US data dominates the day’s schedule via way of Retail Sales, Industrial Production, NY and Philly Fed Manufacturing surveys, Weekly Jobless Claims, Import Prices and Business Inventories. From the overnight run, there are Japan’s record Trade deficit, Australian Unemployment and German WPI to digest, with Canadian Existing Home Sales and Brazil monthly GDP also ahead, and tonight brings the rush of China activity and property sector data. The SCO summit gets under way, with the focus on the bilateral meeting between Putin and China’s President Xi, while ECB’s de Guindos and Centeno feature in terms of central bank speakers. Govt bond supply comes via way of multi-maturity sales in France and Spain, with Canada offering 2-yr, which follow a poor 20-yr auction in Japan, which saw a very fat 5.1 bps tail . In terms of the ECB speakers, it will be interesting to see whether the dovish leaning de Guindos and Centeno echo Lane yesterday in attempting to row back the narrative from the hawks arguing for the need to move quickly to a restrictive stance to emphasizing that inflation pressures are: a) driven by energy prices and b) show no signs of being demand driven, but all down to supply. Yesterday’s IEA monthly oil market report was notable for sticking to an upbeat view on demand, seeing the current dip in the supply/demand balance as temporary, and forecasting a strong rebound in 2023, predicated on the debatable assumption that China will re-open fully (see charts attached), they also noted that the oil price fall “is beginning to support demand according to early indicators”.

** U.S.A. – Retail Sales, Industrial Production & NY/Philly Fed surveys **

Retail Sales are forecast to dip 0.1% m/m on headline and be unchanged ex-Autos, as gasoline price falls (down 12.8% m/m) offset volume gains, with Auto Sales a further drag, while the ex-Autos and the Control Group measures seen up a solid 0.5% m/m. In the manufacturing sector, Industrial Production is expected to be constrained to a 0.1% m/m gain by seasonal adjustments to Auto output (a mean reversion from July’s surge that was largely due to atypical re-tooling and maintenance). Meanwhile the NY Fed Manufacturing survey is expected to bounce from August’s near all-time low, but remain deeply negative, and the Philly Fed survey to dip modestly after bouncing in August; details on prices, orders and supplier deliveries will require close scrutiny. But with the Fed as Clarida suggested being a single mandate (i.e. inflation) central bank, it will require some big downside misses to shift the current market debate from speculating on ’75 or 100 bps?’

** China – Retail Sales, Industrial Production & Property sector data **

These are forecast to show an uptick in Retail Sales to a still very sluggish and intermittent lockdown constrained 3.2% y/y. Industrial Production is expected to be unchanged at 3.8% y/y, though the combination of heat waves, power supply constraints and Covid outbreaks/lockdowns impart considerable downside risks, and are also expected to weigh on Fixed Asset Investment (exp. 5.5% y.t.d. vs. prior 5.7%). The surveyed Unemployment Rate is also seen unchanged at 5.4%, with the focus on any further gains in Youth Unemployment after it hit an all-time high of 19.9% in July. Unsurprisingly given continued sector woes, the run of property related data (including New Home Prices and Residential Property Sales) is likely to show further deterioration, with Property Investment forecast to drop 7.0% y/y after a 6.4% fall in July.