Written Commentary
Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist
The Week Ahead – Preview:
Another quarter draws to an end, but the key influences from the conflicts in the Middle East and Ukraine continue to be unresolved, and supply chains remain disrupted. The AI investment boom is distorting the profile of growth in many economies as well as devouring large volumes of resources (mineral, water, capital and labour), but offers hope of a brighter future driven by technological advances, while also engendering a lot of fears about job security. Equally, the cost of living crisis remains a reality for many households, while public disillusion with political leaders across much of the globe is all too palpable.
The new week has a relatively busy run of statistics, with inflation in the Eurozone, the gamut of US labour market indicators, and a host of surveys including US Consumer Confidence, Manufacturing and Services PMIs dominating the schedule. The ECB hosts its annual Sintra Central Banking Forum ahead of the Rencontres Economiques conference in Aix-en-Provence at the end of the week, with the contrast between ECB, Fed, BoE and BoC rate outlook messaging definitely a focal point. Meanwhile, the EU and China hold trade talks with tensions running ever higher, and the US celebrates its 250th Independence Day and will be closed on Friday. In the commodity space, energy prices continue to discount a gradual return to regular flows from the Persian Gulf, despite intermittent military skirmishes, with the USDA’s and StatCan reports on crops planted acreage.
U.S.A.: Consumer Confidence is expected to get a boost from falling energy prices and the signing of the US/Iran MoU, with a rebound to 94.4 from 93.1 expected, still subdued from a historical perspective, but still clawing higher from January’s low of 89.0. Revisions are now frequently quite large, and there remains a focus on the Labour Differential (Jobs Plentiful minus Hard to Get), which has been in a relatively narrow range (5.7 to 7.5) since the start of the year. JOLTS Job Openings remain very erratic, unexpectedly surging to 7.618 Mln in April from March’s 6.887 Mln, and expected to drop back to 7.30 Mln, with many surveys pointing to a sharp drop in vacancies, and layoff announcements also on the rise again. Thursday’s Payrolls are seen dropping back from a very robust 200K in May to a still solid 113K, with upside risks from anecdotal evidence of strong govt and healthcare hirings, as well as some form of boost from World Cup related hiring in Leisure and Hospitality. Otherwise, both the Manufacturing PMI (seen unrevised at 55.7) and Manufacturing ISM (53.9 vs. May 54.0) are forecast to show little change, while Auto Sales are also seen steady at 16.10 Mln, per se implying little impact on Retail Sales. As an aside, I grew up on a diet of (US) AFN radio and TV in both Libya and Iran. I remember the exuberant jingles about the “Spirit of ’76” being played throughout 200th US Independence year; this year’s 250th celebrations appear to be much more subdued.
Eurozone: CPI is expected to post a very modest 0.1% m/m rise that would see the y/y rate ease to a still high 3.0%, while core CPI is also expected to dip 0.1 ppt to 2.5% y/y. In the detail, falling road fuel prices are likely to offset upward pressure from Household Utilities, as well as some drag from base effects, above all in hotels/restaurants, which surged in June 2025. German Unemployment is forecast to rise 5.3K, leaving the Rate elevated at 6.3%, while Retail Sales are again expected to be flat m/m. But the focus is likely to be on the various ECB speakers at the conferences in Sintra and Aix en Provence, who will likely emphasize high levels of uncertainty, take some comfort from easing energy prices in terms of inflation pressures, and place a good deal of emphasis on the need for reform to boost woeful levels of productivity growth and investment on infrastructure, improving supply chains, and overall economic resilience.
U.K.: Consumer Credit and Mortgage Lending were weaker than expected, though annual growth in Consumer Credit remained solid at 8.9% y/y, while the sharp deceleration in Mortgage Approvals to 56.2K vs. an expected 63.0K was likely a function of the early Q2 scramble to lock in mortgage rates on fears of BoE rate hikes dissipating, rather than offering a signal on housing demand. Tuesday’s BRC Shop Prices are forecast to edge up to 1.3% y/y, as are the Lloyds Business Barometer (48 vs. prior 47), and Nationwide House Prices (0.1% m/m). None of which are likely to have much impact, as the UK public and markets look for clearer contours about likely future PM Burnham’s economic policies will be.
Elsewhere: China’s PMIs are seen continuing to diverge, with official PMIs expected to be little changed at 50.1 Manufacturing and 49.9 Non-Manufacturing, while RatingDog PMIs are forecast to show a slight pick-up in Manufacturing to 52.0, and a setback for Services to 53.0 from 54.4, after a rather choppy picture since the start of the year, primarily as temporary boosts from public holiday spending prove to be short-lived. The imbalanced profile of China’s growth, with high-tech and energy transition related strength contrasting with weak domestic demand and a persistent drag from the property sector, remains.
Japan’s Q2 BoJ Tankan is expected to remain broadly at robust levels, with outlook measures anticipating a steady profile for H2 2026, with AI related investment likely to boost the All Industry CapEx outlook to 11.0%. Canada’s April monthly GDP is expected to show a relatively sharp bounce to 0.4% m/m, after Q1 GDP unexpectedly dipped -0.1% SAAR, per se more of a reactive correction than pointing to a sustained pick-up in activity.
There are four S&P 500 companies reporting this week, with worldwide corporate earnings highlights as compiled by Bloomberg News likely to include: Naspers, Nike and Prosus.
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