Macroeconomics: The Day Ahead for 31 August

  • Typically busy run of statistics at month end: digesting lukewarm China PMIs, better than expected Japan & Korea Production, UK food price surge and weak business survey, renewed China Covid lockdown
  • Awaiting German labour report, Eurozone CPI, India and Canada GDP, US ADP Employment and Chicago PMI; good number of Fed speakers
  • Eurozone CPI expected to edge up, with lower than expected French reading imparting downside risk, marginal impact on ECB September rate decision
  • USA ADP Employment: solid gain expected with JOLTS Job openings showing strength of underlying labour demand
  • India GDP: re-opening and base effects expected to power Q2 surge, solid momentum going into H2 2022

EVENTS PREVIEW

As is typically the case, the final day of the month brings a deluge of statistics, and will also see a good deal of Fed speak. China’s official NBS PMIs were only a tad better than expected and still pointing to an economy expanding at a tepid pace. By contrast Industrial Production from Japan and South Korea were better than expected, as were Japanese Retail Sales. The UK’s BRC Shop Price Index  jumped yet again, wholly driven by a further surge in food prices, while the Lloyds Business Barometer took another tumble, and while the index is still well above 2008 & 2020 levels, it is at levels which signal the economy is stalling. There are also French CPI and German Import Prices to digest. Ahead lie German Unemployment, Eurozone Italian and Polish CPI, Indian Q2 GDP and GVA, US ADP Employment and Chicago PMI and Canada’s June and Q2 GDP.

** Eurozone August HICP

After broadly as expected readings from Germany and Spain, but slightly lower than forecast French HICP, Eurozone CPI readings may turn out slightly lower than forecasts which look for headline and core measures to edge up 0.1 ppt to 9.0% and 4.1% in y/y terms. As noted yesterday, whether the outturn is above or below forecasts, they will probably only impact the decision on the size of the September rate cut at the margin, given that the bigger discussion is around the balance between deteriorating growth prospects, and how aggressive rate hikes need to be to try and rein in inflation, while at the same time considering an already sharp squeeze on ‘financing conditions’, even if recent ECB speakers (mostly hawks) have not even paid lip service to the latter. Indeed yesterday’s undetailed announcement of EU measures to try and decouple electricity from gas prices in coming weeks is perhaps more material to the ECB’s rate trajectory, if the measures are credible.

** U.S.A. August ADP Employment **

This is the first edition of the ADP Employment under its new methodology, and resuming after being suspended since May, and it will also include an estimate of wage growth. Unsurprisingly the consensus is an agnostic 300K, matching the consensus for Friday’s Payrolls, even though the prior methodology was much better aligned with the Household (which generate the Unemployment Rate) rather than the Establishment survey. Yesterday’s Consumer Confidence survey suggested an easing in labour demand (as measured by a pickup in ‘Jobs Not So Plentiful to 40.6 from 38.4, with Jobs Plentiful slipping to 48.0 from 49.2), though still implying a very strong labour market.

** India Q2 GDP **

India’s Q2 GDP is seen jumping sharply in y/y terms to 15.3% from Q1’s 4.1%, thanks to a combination of re-opening and hefty base effects, given that Q2 2021 was depressed by the second Covid-19 wave. While impressive given inflation pressures, supply chain disruptions due to the Russian invasion of Ukraine and the chill winds blowing from a weak Chinese economy, this would still fall slightly short of the RBI’s projection of 16.2%. The solid momentum should extend into H2 2022 given the easing of energy and other commodity prices, and govt measures to tackle inflation, which should allow the RBI to ease back on its recent aggressive tightening, rather than moving to a restrictive policy stance.

To view the full report and to sign up for daily market commentary please email admisi@admisi.com

The information within this publication has been compiled for general purposes only. Although every attempt has been made to ensure the accuracy of the information, ADM Investor Services International Limited (ADMISI) assumes no responsibility for any errors or omissions and will not update it. The views in this publication reflect solely those of the authors and not necessarily those of ADMISI or its affiliated institutions. This publication and information herein should not be considered investment advice nor an offer to sell or an invitation to invest in any products mentioned by ADMISI.

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.

© 2022 ADM Investor Services International Limited.

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.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

Latest News & Market Commentary

Explore the latest edition of The Ghost in the Machine

Explore Now