Given that the outcome of the September FOMC (19th-20th) will depend on the two CPIs and two payroll reports prior to the meeting, all roads this week lead to US payrolls on Friday. Ahead of that, DB's Jim Reid writes that tomorrow JOLTs data will give delayed clues as to the current tightness of the labor market underneath the headline numbers. For those of us who still believe old fashioned metrics of the cycle matter, then the quarterly Fed SLOOS later today could actually be the most informative for where the economy might be in 6-12 months. We also have the manufacturing (tomorrow) and services (Thursday) ISMs as a timely indicator of the momentum in the US economy.
Also today’s Eurozone CPI and GDP prints was closely watched after the German and French prints on Friday. As noted earlier, it showed that the economy had escaped from contraction with core inflation remaining sticky. With the ECB now as data dependent as the Fed, these releases take on added significance ahead of their September 14th meeting.
Stand by also for a marginal 25bps vs 50bps BoE meeting on Thursday (DB at 25bps) and another close call for the RBA tomorrow where a 25bps hike is expected against no change. Another packed week for corporate earnings will feature names including Apple, Amazon (both Thursday), AMD (tomorrow) and Qualcomm (Wednesday). Otherwise, a third or 169 S&P 500 and 87 Stoxx 600 companies will be reporting this week.
Going through some of the key releases now and starting with payrolls, DB economists expect some payback from state and local government education hiring for the headline print (their forecast is +175k, just below consensus at +200k vs. +209k previously), they expect a slight pick up in private (+175k vs. +149k) payrolls inline with consensus. This would be below the three-month averages for headline (+244k) and private (+196k) payrolls gains. Watch out for average hourly earnings and hours worked as well. Also keep an eye out for the unpredictable and less reliable ADP (Wednesday). Last month's +497k blew away all forecasts, and led to a yield sell-off, but this week our economists are expecting a more normal +175k.
Unit labor costs and productivity numbers on Thursday will also be in focus following the GDP and ECI data last week. Our team forecasts preliminary Q2 growth in productivity to come in at +1.1% following a -2.1% print previously. Unit labor costs are seen moderating from +4.2% to +2.6%.
Turning to the BOE, DB expects a +25bps hike taking the Bank Rate to 5.25%, although it is a close call between that and +50bps. Beyond next week's decision, Sanjay sees two more +25bps hikes, with rate cuts potentially starting from Q2-24. The central bank's Decision Maker Panel survey will be out that day as well.
In Europe, the main events will be today's flash CPI and Q2 GDP prints for the euro area, where headline CPI came in as expected at 5.3%, while core CPI came in hotter at 5.5% (unch from last month). This was the lowest headline inflation since January 2022, but with core inflation only a couple of tenths below its peak this March. Meanwhile, GDP came in slightly better than expected at 0.3% MoM and 0.6% YoY, just above the estimates of 0.2% and 0.5%, respectively. Country prints out on Friday have already given a good sense of the direction of travel. July inflation came in at +6.5% in Germany, (+6.6% exp), +5.1% in France (+5.0% exp) and +2.1% in Spain (+1.6% exp). Elsewhere, growth disappointed in Germany, stagnating in Q2 (0.0% qoq vs +0.1% exp) after the technical recession seen during the winter. But it was stronger in France (+0.5% vs +0.1% exp) and Spain (+0.4% qoq, in line with exp).
After the official China PMI earlier today, we will get the Caixin indicators for manufacturing (tomorrow) and services (Thursday) to further enhance our understanding of the current state of the Chinese economy as we wait for fresh stimulus announcements.
In earnings, with around half of the S&P 500 companies having already reported results, all eyes will be on Apple and Amazon, releasing earnings Thursday. Elsewhere in tech, AMD and Qualcomm will be closely watched when it comes to chips. Uber, Shopify and PayPal also report. See Binky Chadha’s review of the strong reporting season so far here.
Day-by-day calendar of events, courtesy of DB:
Monday July 31
- Data: US July MNI Chicago PMI, Dallas Fed manufacturing activity, China July official PMIs, UK June net consumer credit, mortgage approvals, M4, Japan July consumer confidence index, June retail sales, industrial production, housing starts, Italy Q2 GDP, July CPI, Germany June retail sales, import price index, Eurozone Q2 GDP, July CPI
- Central banks: Fed SLOOS, ECB Survey of monetary analysts
- Earnings: Heineken, Sumitomo Mitsui, Daiichi Sankyo, Arista Networks
Tuesday August 1
- Data:US July ISM index, total vehicle sales, Dallas Fed services activity, June JOLTS report, construction spending, China July Caixin manufacturing PMI, UK July Lloyds business barometer, Nationwide house price index, Japan June job-toapplicant ratio, jobless rate, Italy July PMI, new car registrations, budget balance, June unemployment rate, Germany July unemployment claims rate, Eurozone June unemployment rate, Canada July PMI
- Earnings: Merck & Co, Toyota Motor, Pfizer, AMD, HSBC, Caterpillar, Starbucks, BP, Diageo, Mitsubishi UFJ Financial, Uber, Altria, DHL, Marriott, Pioneer Natural Resources, Electronic Arts, Devon Energy, Daimler, Pinterest
Wednesday August 2
- Data: US July ADP report, Japan July monetary base
- Central banks: BoJ minutes of June meeting
- Earnings: Teva, Qualcomm, Shopify, PayPal, Equinix, Ferrari, Occidental Petroleum, Kraft Heinz, DoorDash, Albemarle, MGM Resorts, Zillow, Etsy, Telecom Italia
Thursday August 3
- Data: US July ISM services index, Q2 unit labor costs, nonfarm productivity, June factory orders, initial jobless claims, China July Caixin services PMI, UK July official reserves changes, Italy July services PMI, June retail sales, Germany June trade balance, France June budget balance, Eurozone June PPI
- Central banks: BoE decision, Decision Maker Panel survey, Fed's Barkin speaks
- Earnings: Apple, Amazon, ConocoPhillips, Amgen, AB InBev, Booking Holdings, Stryker, Airbnb, Gilead Sciences, Petroleo Brasileiro, Cigna, Regeneron, Monster Beverage, Merck KGaA, BMW, EOG Resources, Nintendo, Infineon, Block, Apollo, Moderna, Cheniere, adidas AG, Warner Bros Discovery, Rolls-Royce, Expedia, DraftKings
Friday August 4
- Data: US July jobs report, UK July construction PMI, new car registrations, Italy June industrial production, Germany July construction PMI, June factory orders, France Q2 wages, June industrial production, Eurozone June retail sales, Canada July jobs report
- Central banks: BoE's Pill speaks
- Earnings: Dominion Energy, AP Moller - Maersk, LyondellBasell, Vonovia, Dufry
* * *
Finally, looking at just the US, Goldman writes that the key economic data releases this week are JOLTS and ISM manufacturing on Tuesday, and the employment situation report on Friday. There are a few speaking engagements from Fed officials this week, including remarks from presidents Goolsbee and Barkin.
Monday, July 31
- 09:20 AM Chicago Fed President Goolsbee (FOMC Voter) speaks: Chicago Fed President Austan Goolsbee will speak in an interview on Yahoo! Finance Live. On July 7 Goolsbee said “there are some modest increases to come, but we’ve done a lot of the lifting and now we’re waiting for the impact.” He added “overall, the jobs market is outstanding and is getting back to a balanced, sustainable level.”
- 09:45 AM Chicago PMI, July (GS 44.0, consensus 43.4, last 41.5): We estimate that the Chicago PMI rebounded by 2.5pt to 44.0 in July, reflecting firmer domestic freight activity but mixed East Asian industrial data.
- 02:00 PM Senior Loan Officer Opinion Survey, banks tightening C&I loans for large and middle-market firms, July (last 46.0)
Tuesday, August 1
- 10:00 AM Construction spending, June (GS +1.2%, consensus +0.6%, last +0.9%)
- 10:00 AM ISM manufacturing index, July (GS 47.0, consensus 46.9, last 46.0): We estimate that the ISM manufacturing index rose 1.0pt to 47.0 in July, reflecting firmer domestic freight activity but mixed East Asian industrial data. Our GS manufacturing tracker rose by 0.5pt to 47.8.
- 10:00 AM JOLTS job openings, June (GS 9,500k, consensus 9,600k, last 9,824k)
- 10:00 AM Chicago Fed President Goolsbee (FOMC Voter) speaks: Chicago Fed President Austan Goolsbee gives welcoming remarks at a Chicago Fed event. A recording of the remarks will be made available.
- 05:00 PM Lightweight motor vehicle sales, July (GS 15.9mn, consensus 15.7mn, last 15.68mn)
Wednesday, August 2
- 08:15 AM ADP employment report, July (GS +200k, consensus +183k, last +497k): We estimate a 200k rise in ADP payroll employment in July, reflecting net strength in Big Data employment indicators.
Thursday, August 3
- 08:30 AM Initial jobless claims, week ended July 29 (GS 225k, consensus 227k, last 221k): Continuing jobless claims, week ended July 22 (consensus 1,723k, last 1,690k)
- 08:30 AM Nonfarm productivity, Q2 preliminary (GS +2.4%, consensus +2.2%, last -2.1%): Unit labor costs, Q2 preliminary (GS +2.7%, consensus +2.5%, last +4.2%); We expect a 2.4% increase in nonfarm productivity (qoq saar) in the preliminary Q2 reading. We expect growth in unit labor costs—compensation per hour divided by output per hour—of +2.7%.
- 10:00 AM Factory orders, June (GS +2.0%, consensus +2.1%, last +0.3%); Durable goods orders, June final (consensus +4.7%, last +4.7%); Durable goods orders ex-transportation, June final (last +0.6%); Core capital goods orders, June final (last +0.2%); Core capital goods shipments, June final (last +0.0%)
- 08:30 AM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Tom Barkin will speak to the Montgomery County Chamber of Commerce in Blacksburg, Virginia, in a talk entitled “recession Revisited.” Speech text will be made available. On June 16, Barkin said "I am still looking to be convinced of the plausible story that slowing demand returns inflation relatively quickly… If coming data doesn’t support that story, I’m comfortable doing more."
- 10:00 AM ISM services index, July (GS 53.5, consensus 53.0, last 53.9): We estimate that the ISM services index pulled back by 0.4pt to 53.5 in July. Our forecast reflects downward convergence toward other business surveys (services tracker +0.9pt to 52.4).
Friday, August 4
- 08:30 AM Nonfarm payroll employment, July (GS +250k, consensus +200k, last +209k); Private payroll employment, July (GS +225k, consensus +175k, last +149k); Average hourly earnings (mom), July (GS +0.3%, consensus +0.3%, last +0.4%); Average hourly earnings (yoy), July (GS +4.2%, consensus +4.2%, last +4.4%); Unemployment rate, July (GS 3.5%, consensus 3.6%, last 3.6%); Labor force participation rate, July (GS 62.6%, consensus 62.6%, last 62.6%): We estimate nonfarm payrolls rose by 250k in July (mom sa). Big Data indicators indicate strong job growth on net, and payroll growth tends to pick up in the early summer when the labor market is tight, reflecting strong hiring of youth summer workers. We estimate the unemployment rate edged down one tenth to 3.5% (from 3.57% in June) reflecting a rise in household employment and unchanged labor force participation (at 62.6%). We estimate a 0.3% increase in average hourly earnings (mom sa) that lowers the year-on-year rate to 4.2%, reflecting waning upward wage pressures and positive calendar effects.
Source: DB, BofA, Goldman
