Macroeconomics: The Day Ahead for 25 August

  • Busy day for data, events and earnings, but focus already on Powell; digesting BoK rate hike, German GDP revision, better than expected French Business Confidence; awaiting German Ifo, UK CBI Retailing, US weekly jobless claims and Q2 GDP revision; ECB minutes; Italy 2-yr and US 7-yr; resource sector tops earnings in Asia/Europe
  • Germany Ifo Business Climate: further fall expected as energy crisis deepens
  • US weekly Jobless Claims seen steady, few signs of significant labour market loosening
  • US Q2 GDP: very marginal upward revision seen on better Private Consumption; trade and inventories the wild cards; very historical

EVENTS PREVIEW

A much busier day for data, events and corporate earnings, but markets are likely to hunker down ahead of Powell’s Jackson Hole speech tomorrow. There is Japan Services PPI, detailed German Q2 GDP and French Business Confidence and the Bank of Korea’s as expected 25 bps rate hike to digest, ahead of Germany’s Ifo and UK CBI Retailing surveys, while the US has the first revision to Q2 GDP and weekly jobless claims. The ‘account’ of the ECB’s July policy meeting will be of interest in terms of the rationale for the sharper than unexpected July hike, and the unceremonious jettisoning of forward guidance, thus bringing it into line with the BoE and Fed, as well discussion around tighter ‘financing conditions’, and the inherent conflict between broadening inflation pressures, and quite rapidly dimming growth prospects. Poland’s NBP and Banco de Mexico also published policy meeting minutes. In earnings terms, energy and resource sector companies dominate via way of CNOOC, PetroChina, Jiangxi Copper and Sibanye Stillwater, while the US looks to Dell, Dollar General, VMware, and Canada to CIBC and Toronto-Dominion Bank. Govt bond supply comes via way of Italian 2-yr and US 7-yr. The upward revision to German Q2 GDP to 0.1% q/q was on the surface a little more encouraging, especially the better than expected 0.8% q/q for Private Consumption (Q1 also revised up to 0.8%). But with Govt Spending up 2.3% q/q against a forecast of 0.6% (Q1 revised up to 1.8% q/q), while CapEx fell 1.3% q/q vs. expected -0.2%, and Q1 revised down to 2.1%, the rest of the details were rather poor.

** Germany – Aug Ifo Business Climate **

The Ifo Business Climate is expected to post a further fall to 86.8 from July’s 88.6, with expectations and current conditions seen falling in equal measures. As has been often observed there is no reliable read across from either PMIs or the ZEW to the Ifo survey, even if the weakness in PMIs was rather more marked in Services than manufacturing and trade. In truth, anything less a than 1.0 pt miss (upside or down) relative to forecasts would be moot, given the narrative around the German economy remains dire, given the ongoing and very deep-seated energy crisis that is being amplified by the drought.

** U.S.A. – Q2 GDP, Weekly Jobless Claims **

A marginal improvement on the advance reading of Q2 GDP from -0.9% SAAR to -0.7% is expected, predicated on an upward revision to Personal Consumption from 1.0% to 1.5%, though as a rule of thumb the largest revisions tend to be in the eternal wild card of Inventories, along with Net Exports, Business CapEx and Housing Investment. Eminently this is not going to be an important consideration in terms of Powell’s message tomorrow, given that it is a) historical, and b) has little bearing on the outlook for Q3 and Q4 on any front (jobs, prices or growth). This week’s Initial Claims are seen little changed at 252K from the prior modestly better than expected, which underscored that whatever loosening in the labour market that there has been has been modest, and for the time being at least hardly heralds a major shift up in the Unemployment Rate.

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© 2021 ADM Investor Services International Limited.

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