Macroeconomics: The Day Ahead for 22 July

  • PMIs dominate data schedule, as UK Retail Sales, Consumer Confidence and Japan CPI are digested; Mexico mid-month CPI also on tap; modest events schedule features ECB Q2 Survey of Professional Forecasters and expected Russia rate cut; Twitter tops US earnings run
  • UK: consumer data remains downbeat, despite modest rise in ex-Auto Fuel Retail Sales, but may not prevent BoE from a 50 bps hike given labour and inflation data
  • PMIs: Japan, Eurozone and UK measures set to underline accumulating headwinds to growth outlook, as inflation pressures persist; US PMIs seen holding up slightly better, but overall pace of growth modest

EVENTS PREVIEW

G7 & Australia flash PMIs dominate a relatively busy weekending data run, with UK GfK Consumer Confidence and Retail Sales along with Japan’s National CPI to be digested, with Mexico’s mid-month CPI also ahead. The events schedule is quite light with the ECB’s Survey of Professional Forecasters and a 50 bps rate cut expected in Russia, while the US corporate earnings run has Twitter as its focal point, along with results from American Express, HCA Healthcare, NextEra Energy, Schlumberger and Verizon Communications. News that a formal agreement will be signed today to facilitate grain exports from the Ukraine will likely bear down on some agricultural commodity prices, but with extreme weather in evidence across the globe, there will be a good deal of caution, particularly as it remains unclear what sort of volumes will be able to be exported. Secondly Russia is clearly not to be taken at its word, and is more than capable of reneging on any agreement, likely citing some form of breach, which may not even be true. Some thoughts on yesterday’s ECB decision can be found in this CGTN Europe interview yesterday: https://bit.ly/3Pxmq9p

** U.K. – July GfK Consumer Confidence / June Retail Sales **

UK consumers remain under the cosh, with Consumer Confidence holding at its all-time low, and headline Retail Sales falling modestly on the month, and down 1.2% q/q, and indeed only having posted a singular month of growth (0.1%) in the past 8 months. As much as BoE governor Bailey reiterated his ‘no ifs no buts’ about getting inflation under control this week, the weakness of consumer spending will continue to act as a constraint for the MPC, even if this week’s inflation and labour data made the case for a 50 bps hike in August rather stronger.

** G7 – July flash PMIs **

The overnight PMI readings from Japan and Australia, that saw modest falls in Manufacturing and sharper falls in Services appear likely to be echoed in the UK and Eurozone according to consensus forecasts, with France seeing Manufacturing dip into contraction territory (49.6) and a sharper than expected fall in Services (50.6). The US is expected to see a modest fall in its Manufacturing PMI, and a steady reading for Services, albeit at the weakest levels in the past year. Details will be important, as was evident in yesterday’s Philly Fed, where the headline rise masked weakness in Orders, Employment and Outlooks, while seeing price and supplier delivery measures ease.

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