On Monday, the most important event will be the release of the ISM Manufacturing PMI and ISM Manufacturing Prices for the US.
On Tuesday, the euro area will publish preliminary core CPI y/y and preliminary CPI y/y estimates. In addition, ECB President Lagarde and Fed Chair Powell will participate in a “Policy Committee” discussion at the ECB Forum on Central Banking in Sintra. The US will also release JOLTS job openings data.
On Wednesday, the United States will publish several key indicators, including non-farm employment change, unemployment claims, ISM Services PMI, and FOMC meeting minutes.
Thursday is scheduled to see CPI data released in Switzerland, while markets in the United States will be closed in observance of Independence Day.
Finally, on Friday, Canada will publish data on the change in employment and the unemployment rate. In the United States, the focus will be on average hourly wages, the change in nonfarm employment, and the unemployment rate.
The consensus for the US ISM Manufacturing PMI is an increase from 48.7 to 49.2. After rising above 50 in April, the manufacturing index has fallen for two consecutive months, and this week’s forecast indicates a continuation of this trend. Wells Fargo analysts believe possible reasons for this include economic uncertainty, tight credit conditions, and higher borrowing costs. As long as these conditions continue, the prospects do not look very promising for the manufacturing sector or industrial production.
Eurozone CPI is likely to slow slightly, although there are some upside risks. Overall, inflation in countries like France and Spain was not very promising, as data was somewhat mixed.
The consensus is that the Institute for Supply Management’s services sector PMI will fall slightly from 53.8 to 52.5. The service sector performed better than the manufacturing sector due to the continued high demand from consumers for services for several months. However, this does not help stabilize prices which is what the Fed would like to see.
The Swiss CPI is likely to continue falling on a monthly basis. As a reminder, the Swiss National Bank cut interest rates in June and is maintaining its inflation forecast for the second quarter of 2024 for annual data at 1.4%. However, analysts stressed that rising housing rents and gasoline prices in May put pressure on inflation. If this week’s data comes in line with expectations, it will not have a major impact on the SNB’s decisions. The bank expects the third-quarter average to be 1.5%, so unless this average is significantly exceeded, the bank could deliver another rate cut at its September meeting.
The Bank of Canada will be watching labour market data this week to see if there are any signs of a continued slowdown. Inflation in Canada rose in May after falling since the start of the year, so the bank will be looking at labour market data to see if the downward trend continues.
The consensus for employment change is a decline from 26.7K to 24.5K, with the unemployment rate expected to rise from 6.2% to 6.3%. The continued deterioration in the labor market should help alleviate some of the upward pressure on inflation. Markets expect the Bank of Canada to cut interest rates again at its next meeting in July.
In the US, the consensus on average monthly hourly earnings is 0.3% versus 0.4% previously. As for the non-farm employment change, it is expected to decline from 272K to 189K, while the unemployment rate is likely to remain unchanged at 4.0%.
Despite strong job gains last month, there are signs that the U.S. labor market is slowing. This is evident in the decline in job openings and also in the unemployment rate, which rose to 4.0%, its highest level since 2022.
Wells Fargo analysts point out that two-thirds of nonfarm payroll gains over the past year came from just three industries: government and health care, which are less affected by economic cycles, and leisure and hospitality, which is still recovering from the pandemic. These sectors are expected to continue to be major contributors in the short term, but waning support factors are likely to slow overall job growth in the coming months.