Macroeconomics: The Week Ahead: 7 to 11 August 2023

Written by Marc Ostwald, ADMISI’s Global Strategist & Chief Economist

The Week Ahead – Preview:

The new week brings US and China inflation readings, UK Q2 GDP and monthly activity data, German Industrial Production, China’s credit aggregates, Japan’s Wages and Household Spending. There will be a smattering of Fed speak, but nothing is currently scheduled in terms of ECB, BOE or BoJ speakers, while India’s RBI is seen delivering another ‘hawkish hold’. In the commodity space, the USDA publishes its monthly WASDE report and the US EIA its monthly Short Term Energy Outlook (STEO) along with monthly reports from OPEC and IEA Brazil’s Conab and Unica monthly grains and sugar S&D reports respectively, with Saudi Aramco and Glencore reporting Q2 earnings. It is also another busy week for earnings more broadly worldwide, with the US heading a lighter week for govt bond auctions with its upsized $103 Bln quarterly refunding of 3, 10, & 30-yr, in the wake of last week’s Fitch downgrade, Germany and Austria selling 5 & 10-yr, and the UK 10-yr and Index-Linked 16-yr, while Japan offers 30-yr amid continued curve steepening pressure following the BoJ’s policy tweak.

The statistical schedule has a number of top level items, but is in broader terms quite light, and quite heavily backloaded. US CPI is seen up just 0.2% m/m on both headline and core, though there are some upside risks for energy from utility prices (electricity & gas) offsetting a flattish trend in core Goods prices. Adverse base effects are set to push headline up to 3.3% y/y from 3.0% (and likely to persist in coming months), while services continue to keep core elevated at an unchanged 4.8%, even if housing (OER) pressures are easing somewhat. PPI is also seen up 0.2% m/m on headline and core, with base effects pushing up headline to 0.7% from 0.1%, and core edging 0.1 ppt lower to 2.3%. Surveys are expected to be largely unchanged: NFIB 90.5 vs. 91.0 and Michigan Sentiment 71.5 vs. 71.6; Consumer Credit and the monthly Treasury Budget statement are also due.

China has Trade and Credit Aggregates to accompany CPI and PPI, with forecasts assuming little to cheer. CPI is expected to drop in to deflation with the y/y seen at -0.%=5% vs. June’s unexpectedly soft Flat y/y, weak demand and base effects are likely to contribute. PPI is expected to show less deflation at -4.0% y/y vs. June’s low of -5.4%, though this will be mostly accounted for by energy price base effects. Trade data are projected to see Exports fall slightly more at -12.6% y/y on continued weakness in external demand, while Imports are seen falling at a slightly slower -5.5% (June -6.8%), mostly due to higher commodity prices rather than any pick-up in domestic demand. Credit aggregates are set to revert to a very weak trend, in part due to seasonal effects after quarter end boosted June readings, though the expected slide in new Yuan Loans to just CNY 755 Bln vs. June’s CNY 3.05 Trln will also reflect the already reported sharp 30% drop in mortgage demand.

In the UK there are BRC Retail Sales and expected further drop in the RICS House Prices Balance to -50 vs. prior -46 ahead of Friday’s quarterly GDP and monthly activity indicators. Q2 GDP is seen flat q/q (vs. Q1 0.1%), with Private Consumption and Index of Services also seen unchanged q/q, with the primary support coming from Govt Spending (exp. 1.0% q/q), offset by a relatively sharp drag from Business Investment (exp. -0.9%). Monthly activity indicators assume that the small drag on monthly GDP from the Coronation bank holiday in May results in a modest 0.2% m/m rebound in June also reflected in expectations of a similar rebound for Industrial Production and monthly Index of Services, with Construction Output seen flat.

Elsewhere, Monday’s German Industrial Production is forecast to fall 0.,5% m/m, serving as a reminder that last week’s Orders jump was primarily aircraft related, rather than signalling a potential rebound in German manufacturing. In Japan Labour Cash Earnings are seen edging up to 3.0% from 2.9% y/y, leaving real earnings little changed at -0.9%, with Household Spending expected to contract at a -3.8% y/y pace.

Earnings highlights for the week according to Bloomberg News are likely to include: Acwa Power, Adnoc Gas, Ahold Delhaize, Airports of Thailand, Alibaba Group Holding, Allianz, Assicurazioni Generali, Banco BTG Pactual, Banco do Brasil, Barrick Gold, Bayer, Berkshire Hathaway, BioNTech, Bridgestone, Brookfield, China Mobile, China Telecom, Commonwealth Bank of Australia, Constellation Software/Canada, Coupang, Daikin Industries, Datadog, Deutsche Telekom, Duke Energy, E.ON, East Money Information, Eli Lilly, EnBW Energie Baden-Wuerttemberg, Flutter Entertainment, Foxconn Industrial Internet, Franco-Nevada, Glencore, Globalfoundries, Great-West Lifeco, Hannover Re, Hapag-Lloyd, Henkel, Honda Motor, Illumina, Itau Unibanco, Japan Post, Japan Post Bank, KBC Group, KKR, Li Auto, Manulife Financial, MTR, Munich Re, Novo Nordisk, NTT, Oneok, Orsted, Palantir Technologies, PTT, Recruit, Restaurant Brands International, Rivian Automotive, RWE, Saudi Arabian Oil, Semiconductor Manufacturing International, Siemens, SMC, SoftBank Group, Sony Group, Sun Life Financial, Take-Two Interactive Software, Tokio Marine, Tokyo Electron, Trade Desk, United Parcel Service, Vestas Wind Systems, Walt Disney, Yihai Kerry Arawana, Zoetis, Zurich Insurance Group.

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