Macroeconomics: The Day Ahead for 23 August

  • PMIs front and centre, Eurozone Consumer Confidence, UK CBI Industrial Trends & US New Home Sales also due; Bank Indonesia rate decision, ECB Panetta & Fed’s Kashkari; UK 17-yr I-L & US 2-yr; China resource behemoths, US retailers and Canada bank earnings
  • Eurozone, UK and US PMIs: aside from modest bounce in US Services, all seen dropping further; details on orders, prices, employment and supplier deliveries key
  • US New Home Sales: seen dropping for sixth month in seven, supply ballooning to sub-prime crisis levels, prices starting to crumble

EVENTS PREVIEW

A rather busier day has the G7 flash Manufacturing and Services PMIs as the centrepiece, with UK CBI Industrial Trends survey, Eurozone Consumer Confidence, US New Home Sales and Richmond Fed Manufacturing also due. While the hawks are clearly in the ascendancy at the ECB, it will be interesting to hear what arch dove Panetta observes in his speech today, with Bank Indonesia expected to hold rates at 3.50%, bucking the recent trend of initiating rate hikes in SE Asia, while a further modest 25 bps rate hike is expected in Paraguay, while Fed’s Kashkari speaks tonight. China is again the dominant among corporate earnings, with resource sector behemoths Chalco and CATL getting top billing, while the US has more from the retail sector (Macy’s and Nordstrom), and Bank of Nova Scotia gets this week’s run of major Canadian bank earnings under way.

** Eurozone, UK & USA – August ‘flash’ PMIs **

The run of PMIs and array of other surveys in Europe and North America are unsurprisingly expected to deteriorate vs July readings (as was the case with Japan and Australia overnight), with the sole exception of a rebound in the US Services PMI, though more a case of a reactive correction after an unexpectedly steep drop in July. It will as ever be a case of boring down into the details on Orders, Inventories, Prices and Supplier Deliveries to make any proper analysis, and as has been seen on a number of occasions in recent months, surprises are probable even if risks look very skewed to the downside, and continue to feed current elevated levels of volatility, as rates markets revert to ‘don’t fight the Fed’ mode. The latter in turn creates a skew in likely reactions to Powell’s speech on Friday, particularly if there is perceived to be any less hawkish chink in his messaging on rates.

** U.S.A. – July New Home Sales **

Aside from a false flag rebound of 6.3% m/m in May, New Home Sales have fallen in every month of 2022, with June diving 8.1% m/m, and March and April saw declines of 10.5% and 14.6% m/m respectively. June also saw a 9.5% m/m fall in prices, though they were still up 7.4% y/y, and perhaps most alarmingly saw inventories (months’ supply) jump to 9.3, a level not seen since the sub-prime crisis in 2006/07. Forecasts look for another 2.5% m/m decline in sales, with the fall in mortgage rates relative to June unlikely to have helped much, given that mortgage applications continue to slide.

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© 2021 ADM Investor Services International Limited.

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