Courtesy of Tyler Durden
A look at the key economic events in the relatively quiet week ahead from the perspective (and benchmarks) of Goldman Sachs.
European developments As mentioned, the better than expected 2Q Eurozone GDP numbers on Friday failed to lift EUR/$, which ended the week 4% lower. As highlighted in Friday’s Daily, we do see near term risks for the EUR--one of the reasons we incorporated downside risks to our EUR/$ forecast (1.22 in 3-months), to reflect the potential for rising political tension again. We are again seeing some noise on this front in recent days with the EUR being weighed upon with news headlines such as possible Spanish deviation from fiscal austerity measures. It is interesting also to note that sovereign CDS spreads in the European periphery have also started to creep back up. This is something that we will be paying close attention to in coming weeks and months.
US manufacturing data This week’s Empire, Philly Fed, industrial production and advanced GLI reading are important as usual in gauging the pace of slowing industrial momentum in the US. Consensus expects a slight improvement in both the Empire and Philly Fed readings. We do not forecast the Empire survey, but on the more representative Philly Fed (which is also a component of our GLI), we are expecting a decline.
TICs We get the June TIC s release which will allow us to gauge the latest US Q2 BBoP picture. The US trade deficit has been widening out, especially stark in last week’s June release, which widened out to almost $50bn from $42bn. We’ll see what the upcoming TICs release shows but overall, the underlying flows picture is likely to remain USD negative still.
Central Banks We’ll see some central bank news in the form of the RBA and BOE minutes as well as meetings in Turkey and Mexico. We expect the RBA minutes to make it clearer that the Board is in no rush to move rates higher (even if a subtle tightening bias remains). Our Australian economists continue to expect rates on hold till November. For the BOE MPC minutes, we are not expecting much incremental information, coming right after the last Inflation Report. For the meetings in Turkey and Mexico, we are expecting rates to be left unchanged, in-line with consensus.
Japan 2Q GDP We expect 2Q GDP data to show that the growth underpinned by government stimulus is losing momentum. We forecast a slowdown in real GDP growth to a sequential, annualized rate of +2.1% in 2Q from +5.0% in 1Q, with notable weakness concentrated in personal consumption. [this has just come out at a very disappointing annualized 0.4%, which can only mean the night shift at Liberty 33 is working overtime]
Eurozone CPI (Jul) The flash estimate put the headline inflation rate in the Euro-zone at 1.7% in July after 1.4% in June. There are few details on core inflation, but in Germany it continued to ease, and given that this is the strongest-performing Euro-zone economy at the moment, resource underutilization in the remaining member states is likely even higher, suggesting further easing of core inflation in those countries as well.
Empire Manufacturing (Aug) Consensus expects an improvement here to +8.25 from +5.1.
TIC data (Jun) This will allow us to gauge the latest US Q2 BBoP picture. The underlying flows picture is likely to paint a picture that is fundamentally unsupportive for the USD outlook still.
RBA minutes In our view, the statement accompanying the last decision suggested that the Board spent little time seriously contemplating a decision to move rates in either direction in August – reinforcing our forecast that rates are firmly on hold until November. We expect that they will make it clearer that they are in no rush to move rates higher (even if a subtle tightening bias remains).
UK CPI (Jul) A small drop in petrol prices is likely to have depressed the headline inflation rate a little further to 3.1% yoy after 3.2% in June, we are in line with consensus.
US housing starts (Jul) We are expecting a bounce to +4%mom after last month’s -5% decline. Consensus is at +2%.
US PPI (Jul) We are expecting core PPI at +0.2% mom vs consensus at +0.1%
US Industrial production (Jul) We are forecasting a +0.6% mom gain versus consensus at +0.5%.
UK MPC Minutes The minutes in mid-quarter months are usually pretty uninformative, coming just a week after the much more exhaustive analysis in the Inflation Report. The August Report referred to “particularly large” degree of uncertainty about inflation but we doubt there’ll have been any change in the voting pattern, except for one more (from new member Martin Weale) in favour of unchanged interest rates.
UK retail sales (Jul) Our forecast assumes unchanged nominal growth of 3%yoy, implying a monthly rise in volume terms of +0.5%; consensus is at+0.2%.
US jobless claims Consensus is expecting a slight moderation to 480k in initial claims, after last week’s higher than expected 485k.
Philly Fed (Aug) We are expecting a decline to +3.0 from +5.1 previously. Consensus is expecting a gain to +7.5
Advanced GLI reading We continue to stay focused on our proprietary leading indicator of global industrial cycle momentum. The last read suggests that momentum has turned slightly negative and it will be critical to see if this trend continues.
Turkey central bank meeting No change in rates expected, in-line with consensus.
Canada CPI (Jul) Consensus expects a +0.1% mom gain from -0.1% previously.
Mexico central bank meeting We are expecting no change to rates at 4.5%, in-line with consensus