- Monday:US & Canada Final Manufacturing PMI (Labor Day), Eastern Europe & UK Final Manufacturing PMI (August), China Caixin Final Manufacturing PMI (August)
- Tuesday: Swiss CPI (Aug), Swiss GDP (Q2), Turkish CPI (Aug), US ISM Manufacturing PMI (Aug), Final Manufacturing PMI (Aug)
- Get married: Bank of Canada and National Bank of Canada policy announcements; Australian GDP (Q2), China Caixin Services PMI (Aug), Eurozone and UK Composite/Services Final PMI (Aug), Eurozone Producer Prices (July), Canadian Trade Balance (July), Revised US Durable Goods and Factory Orders (July), JOLTS (July)
- Thursday: Swiss Unemployment (Aug), German Industrial Orders (July), Eurozone and UK Construction PMIs (Aug), Eurozone Retail Sales (July), US Layoffs (Aug), ADP (Aug), Initial Jobless Claims (weekend Aug 31), ISM Services PMI (Aug), Final Composite/Services PMI (Aug)
- Friday: Japanese household spending (July), German industrial output (July), Trade balance (July), UK Halifax house prices (August), Eurozone adjusted GDP (Q2), US non-farm payrolls (August), Canada unemployment/wages (August)
Swiss CPI (Tuesday):
This will be the second reading of the CPI for Q3, after a 1.3% y/y rate in July. For the quarter as a whole, the SNB expects inflation to come in at 1.5% after averaging 1.36% in Q2, which is gradually down from their 1.4% forecast. The release will influence the SNB’s deliberations in September, but another 25bp cut is the base case with 32bp of easing. As a reminder, September is the last meeting with SNB President Jordan, who will be replaced by current Vice President Schlegel. Elsewhere, further insights will be sought on the recent adjustment to sight deposit bonuses and comments from export lobby group Swissmem on the currency; At the beginning of August, Swiss Meem said the fair value of the euro/Swiss franc was 0.98, when it was at 0.92, and called on the Swiss National Bank to limit the strength of the currency because Switzerland’s low inflation environment compared to its peers meant the SNB could afford to let the currency weaken a bit. A point Jordan acknowledged in his recent comments, saying the exchange rate was making things difficult for Swiss industry.
US ISM Manufacturing PMI (Tuesday):
The consensus is now looking for a rise to 47.8 in August from 46.8 in July. By comparison, S&P Global’s preliminary manufacturing PMI data for August showed the manufacturing PMI falling to 48.0 from 49.6, indicating a second straight month of deterioration in business conditions and the sharpest decline since December. The report noted that all five components of the PMI weakened in August. “The steeper declines in new orders and inventories were accompanied by the first decline in factory output in seven months, while employment growth slowed to near stagnation, and supplier delivery times narrowed to the sharpest since February, indicating that suppliers are becoming less busy amid weak demand for raw materials,” S&P wrote. It also noted that finished goods inventories rose sharply for the third time in the past four months, with the latest buildup of unfinished inventory among the largest on record in the survey’s history, often reflecting weaker-than-expected sales.
Bank of Canada Policy Announcement (Wednesday):
The Bank of Canada is expected to cut interest rates to 4.25% on Sept. 5, the third straight 25 basis point cut, according to the latest Reuters poll. Slowing growth and a sluggish labor market are likely to prevent inflation from recovering, with the latest inflation report seeing the BoC looking to average yields closer to target. Attention is likely to focus on the statement and the press conference that follows as participants look for evidence of further easing. The Reuters poll found that analysts expect Canadian rates to end 2024 at 3.75%, according to 20 of 28 respondents, while seven see the year-end rate at 4.00% and one economist sees it at 3.50%. In July, Governor Macklem indicated that if inflation continues to broadly decline in line with their expectations, it is reasonable to expect further rate cuts, but the timing will depend on how the BoC views the opposing forces on inflation, noting that overall economic weakness is dragging inflation down, but price pressures in housing and other services are holding back inflation. The previous statement also acknowledged that risks to the inflation outlook are balanced, abandoning language from April that the BoC was more concerned about upside risks. Money markets are now pricing in 25 basis point cuts at each meeting for the rest of 2024, and July inflation data saw the BoC’s core average fall to 2.43%, revised down from 2.57% to 2.60%, forcing expectations for a rate cut. The July jobs report saw a headline decline, but was driven primarily by part-time jobs as full-time jobs rose. Surprisingly, the unemployment rate remained unchanged at 6.4%, despite expectations of a rise to 6.5%. However, with growth slowing and inflation seemingly back on target, the Bank of Canada has room to continue cutting interest rates by 25 basis points.
Australian GDP (Wednesday):
There is currently no forecast for Australia’s Q2 GDP metrics, with Q1 growth at 0.1% and y/y growth at 1.1%. On GDP, the RBA’s August Monetary Policy Report noted that “partial indicators suggest that GDP growth remained weak in the June quarter,” while “growth in Australia’s major trading partners appears to have slowed slightly more than expected in the June quarter, driven by weaker growth in China.” From a policy perspective, the RBA remains concerned about inflation according to the latest RBA data and the Australian CPI forecast above. As a reminder, the RBA maintained its hawkish tone at its last meeting, confirming that the Board remains firm in its determination to return inflation to target and is not ruling anything out, and that inflation remains above target and is demonstrating its resilience.
US ISM Services PMI (Thursday):
Consensus is currently forecast to rise slightly to 51.5 in August from 51.4 in July. As a benchmark, the S&P Global Manufacturing PMI for the month showed service business activity rising to a two-month high of 55.2 (albeit from 55.0). The survey compiler said that while the data paints a solid growth picture, pointing to solid third-quarter GDP growth and alleviating fears of a near-term recession, with selling price inflation falling to near-pre-pandemic levels, growth has become increasingly dependent on the services sector as manufacturing, which often drives the economic cycle, has declined. However, the report noted that service sector growth has been constrained by hiring difficulties, which continue to push wage rates higher, meaning that overall input cost inflation remains elevated by historical standards.
US Non-Farm Payrolls (Friday):
The US is expected to add 163,000 nonfarm jobs to the economy in August (114,000 prior; 3-month average of 170,000, 6-month average of 194,000, 12-month average of 209,000). The unemployment rate is expected to decline to 4.2% from 4.3% (note: the FOMC in June forecast the unemployment rate to be 4.0% this year, rising to 4.2% in 2025). Average hourly earnings growth is expected to rise to +0.3% m/m in August (0.2% in July; 3-month average of +0.3%; 6-month average of +0.27%); Capital Economics said the weak July data raised concerns that the Fed could start its rate-cutting cycle with a 50bps rate cut, but there’s reason to treat the data with caution given the surge in people forced to work part-time or unable to work at all due to the weather, suggesting that Hurricane Beryl was actually having a significant impact. CapEco believes the weather conditions subtracted about 30,000 from the July headline, which should be reflected in August. However, more broadly, CapEco notes that despite some signs of stabilization, overall employment activity has been weak, with the ISM and S&P Global indexes hitting record lows due to the pandemic and weak service sector data. “Arguably the biggest shock in July was the 0.2 basis point rise in the unemployment rate, which triggered the Sahm rule,” he said, but he suggested that temporary disruptions, particularly in the auto sector, were responsible, adding that “if most of those temporarily laid off workers return to their jobs in August as we expect, the unemployment rate will fall back to 4.2% or perhaps even 4.1%.” Other analysts have suggested that August’s jobs data will be influential in determining how the Fed begins its rate-cutting cycle. Financial markets are currently pricing in a 25 basis point rate cut, but have priced in about a 30% chance of an additional 50 basis point cut.
Canadian Labour Market Report (Friday):
The Canadian labour market report will be digested to help determine the future path of easing from the Bank of Canada, with the bank widely expected to cut rates in September, and is likely to have a greater impact on meetings throughout the year. Rates are currently at 4.50%, with a majority of analysts expecting rates to end 2024 at 3.75%, although seven analysts surveyed see rates at 4.00%, while one sees rates at 3.50% (there are only three meetings left this year, including September). The majority of analysts agree with current market pricing, which sees 25bp rate cuts in September, October and December. A weak report could add conviction to some of the more pessimistic calls.
This article originally appeared on Newsquake.
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