US data disappoints and pares back a Fed rate hike
Friday ended with poor data releases from the world’s biggest economies. Firstly, as China’s slowdown hit the global economies, we saw the Industrial Production y/y figure drop again below market expectations to 6%. Also, the Retail Sales data for the year fell short of expectations. Following this, the US the world’s largest economy, posted their monthly Retail Sales gauge, and followed the trend by disappointing with a 0% reading against a forecasted 0.4%. Also Core Retail Sales fell from a revised 0.9% reading down to a very poor -0.3%. This showed that consumers in America had cut back on purchases, indicating a moderation in spending. This will now soften the expectations of an acceleration of growth for Q3. As consumer spending is the largest barometer of the US economic growth, July’s reading and tame inflation points allows the Fed to further hold off a rate rise.
Today, Japan’s growth has fallen, with the first reading of Q2 GDP now at 0.0% from March’s 0.5%. On the annualized figure, growth fell to a poultry 0.2%, down from 1.9%. This stall in Japan’s economy is casting doubts over the Abenomics, with calls for policymakers to do more to weaken the exchange rate, as the reading for Q2 GDP growth revealed exports are now weighing heavily on production. The other data release today comes from the States in the afternoon as the Empire State Manufacturing Index is posted, with markets expecting the index to increase to 2.1 from 0.6.
After the Bank of England cut rates and implemented further QE, the inflation y/y figure will be published, which is due to remain constant at 0.5%. However, due to the massive depreciation of the Pound following Brexit, the figure could increase as imports become more expensive. Germany will release their ZEW Economic Sentiment, which is forecast to post a positive 2.1 reading, adding to a more positive outlook for the powerhouse of the single currency zone. Attention then turns to the US, where the monthly inflation figure will be published. The reading is expected to register at 0.0% showing a decline from 0.2% in the previous month.
- UK CPI y/y
- Euro German ZEW Economic Sentiment
- US CPI m/m
- US Industrial Production m/m
The main focus for the markets will be the release of July’s FOMC meeting minutes, where all will look to see if the post meeting dovish tone will be evident in the minutes and gain further insight into how close they are to raising rates this year. However, before this, the UK release some labour data, with the Unemployment Rate due to stay at 4.9%. Average Earnings is expected to register at 2.5% and Claimant Count Change is expected to increase from 0.4K up to 5.2K.
- UK Average Earnings
- UK Claimant Count Change
- UK Unemployment Rate
- US FOMC Meeting Minutes
Retail Sales of the month will come into focus from the UK, as a disappointing figure of -0.9% was seen previously. The anticipated reading is expected to show a gradual improvement of 0.1% for July. Further inflation figures are seen this time from the Eurozone where the ECB are trying to tackle the constant deflationary price pressures. The yearly figure is due to stay at 0.2%.
- UK Retail Sales m/m
- Euro CPI y/y
- US Unemployment Claims
This week ends with very little high tier data releases. Public Sector Net Borrowing will be the only data release from the UK with a surplus figure of 2.3Bn due to be published.
- UK Public Sector Net Borrowing