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
Tuesday August 1
Wednesday August 2
Thursday August 3
Friday August 4
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
Tuesday, August 1
Wednesday, August 2
Thursday, August 3
Friday, August 4
Source: DB, BofA, Goldman