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Week Ahead – Will US Core CPI Stay at the Lowest Levels Since 2021?

By MarketPulse (Ed Moya)Market OverviewAug 04, 2023 03:33PM ET
www.investing.com/analysis/week-ahead--will-us-core-cpi-stay-at-the-lowest-levels-since-2021-200640685
Week Ahead – Will US Core CPI Stay at the Lowest Levels Since 2021?
By MarketPulse (Ed Moya)   |  Aug 04, 2023 03:33PM ET
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US

Everyone will be watching the US inflation report as a cool report could help support soft landing hopes and seal the deal for some that the Fed is done raising rates. Expectations for the July inflation report are for headline inflation to rise towards the mid-3% range, while core inflation remains steady and holds onto the lowest levels since 2021 on both a monthly basis at 0.2% and at 4.8% from a year ago. Any hot surprises might bolster the case that the Fed may need to raise rates at the November meeting.

Wall Street will pay close attention to Tuesday’s NFIB Small Business Optimism report and trade data. Thursday is all about the inflation report and the initial jobless claims. Friday contains the release of the PPI report and the preliminary University of Michigan Sentiment report/inflation expectations.

Fed Speak will also include appearances by Bostic and Bowman on Monday. Harker speaks on Tuesday and Bostic provides remarks on employment on Thursday.

Earnings for the week include Alibaba Group Holding (NYSE:BABA), Allianz (ETR:ALVG), Bayer (OTC:BAYRY), Berkshire Hathaway (NYSE:BRKa), China Mobile (NYSE:CHL), China Telecom (NYSE:CHA), Eli Lilly (NYSE:LLY), Honda Motor, Novo Nordisk (NYSE:NVO), Palantir Technologies (NYSE:PLTR), Rivian Automotive Inc (NASDAQ:RIVN), RWE AG (OTC:RWEOY) ST O.N. (BIT:RWE), Saudi Aramco (TADAWUL:2222), Siemens Ltd (NS:SIEM), SoftBank Group Corp. (TYO:9984), United Parcel Service (NYSE:UPS), and Walt Disney (NYSE:DIS)

Eurozone

Next week starts quickly on Monday with both Eurozone Investor Sentiment and German Industrial Production. The August Sentix Eurozone sentiment reading should show confidence remains low in August, declining further from -22.5 to -25.0. The June German industrial production data should show that manufacturing isn’t ready to rebound as expectations on a monthly basis are for a -0.5% drop, worse than the -0.2% prior reading. Weakening data points should support the view that inflation will slow significantly later this year.

UK

This week is all about growth and that is disappearing in the UK. Friday’s preliminary look at Q2 GDP is expected to show the economy is stagnating. The consensus estimate for Q2 GDP is for a flat reading (consensus range of 0.0% to 0.1%), down from 0.1% in Q1. The BOE is still likely to deliver more rate hikes, which should mean the UK economy is recession bound.

Russia

The CBR will have further pressure to keep on raising rates after a hot July inflation report. Headline inflation in July is expected to jump from 3.25% to 4.25%, well above the 4% target. At the end of the week, the release of the advance Q2 GDP reading is expected to show the economy rebounded from -1.8% to +3.3%.

South Africa

Next week mainly offers tier two and three economic data with both mining data and Manufacturing production results that are expected to show a modest rebound.

Turkey

A few economic indicators will be released this week, with the focus mainly on June Industrial Production, which should show activity turned negative.

Switzerland

Unemployment data on Monday is expected to show the labour market remains tight as the unemployment rate holds steady at 2.0%. The focus remains on inflation for Switzerland and a strong labour market could keep wages strong and that should support the SNB case for a September hike.

China

Three key data to watch. On Tuesday, the Balance of Trade for July, another horrendous print is being forecasted for exports growth to plunge further to -14% year-on-year from -12.4% recorded in June If it turns out as expected, it will be the third consecutive month of contraction. Imports growth is forecasted to improve slightly to -5.2% year-on-year from -6.8% in June but still a potential fifth consecutive month of contraction. Overall, such forecasts are pointing to a continuation of weak internal and external demand that market participants are getting fatigued from China’s top policymakers’ ongoing stimulus rhetoric which is too vague and too minor in the past two months in order to boost domestic consumption and the languish property sector.

Consumer inflation and producer prices data will be out on Wednesday. Higher odds of deflationary risk as the forecast is calling a negative reading on inflation at -0.3% year-on-year from 0% printed in June. Producer prices are forecasted to contract again to -5% year-on-year from -5.4% in June, a potential ten consecutive months of negative growth.

On Friday, we will have outstanding loan growth and M2 money supply data for July.

On the earnings front, Alibaba, one of China’s Big Tech will report its June quarter 2023 earnings results on Thursday, 10 August. Noteworthy to scrutinise Alibaba’s earnings and forward guidance as China policymakers have loosened their grip on the business operations of China’s Big Tech firms.

India

The key highlight will be RBI’s interest rate decision on Thursday where the consensus is expecting RBI to stand pat at 6.5%, a potential third consecutive of no change on the policy rate due to easing inflationary pressures.

On Friday, industrial production for June will be out, and a drop in growth is being forecasted at 4.1% year-on-year from 5.7% in May, still a potential eight consecutive month of expansion.

Australia

A light data week ahead, Westpac consumer confidence for August out on Tuesday where a dip of -0.7% month-on-month is being forecasted from 2.7% printed in July.

Lastly, consumer inflation expectations for August will be released on Thursday.

New Zealand

Two data to take note of electronic retail card spending for July out on Wednesday, and manufacturing PMI for July on Friday.

Japan

The Bank of Japan (BoJ) Summary of Opinions will be out on Monday and market participants will be scrutinising any hints on the next step in monetary policy normalisation in terms of timing and form as BoJ has indirectly revised upward on the upper limit of its Yield Curve Control (YCC) on the 10-year JGB yield to 1% during its last meeting in July.

On Tuesday, we will have household spending for June where the consensus is expecting a slight contraction to -4.1% year-on-year from 4% in May but on a month-month basis, a recovery is expected at 0.3% in June from -1.1% printed in May. Bank lending data for July will be released as well on the same day.

Singapore

The only key data will be the Q2 GDP finalised reading out on Friday where the prior flash figures brushed away a recession scare as Q2 q/q and y/y came in positive at 0.3% and 0.7% respectively.

Markets

Energy

Oil prices have remained supported by OPEC+, as they appear committed to keeping this market tight. The upcoming week should have some of the focus shift back to demand. On Monday, Saudi Aramco will post its earnings results. Tuesday has two events, with the release of some key Chinese trade data, which includes oil imports and the US EIA Short-term Energy Outlook (STEO). On Thursday, OPEC publishes their monthly report, while the EIA releases their monthly publication on Friday.

Natural gas prices have also steadied in the US over cooler weather, while Europe continues to deal with a tight market over Norwegian outages.

Gold

After the Treasury’s quarterly refunding announcement, concerns grew over the US widening deficit. Gold pared weekly losses as the bond market selloff saw some relief after the NFP report showed the labour market is softening. The focus next week will be all about US inflation and some major data out of China. Soft landing hopes remain, but they could get rattled if the disinflation process stalls.

Crypto

Bitcoin continues to consolidate below $29,000 as volatility struggles to return. Bitcoin was little changed after both the Treasury quarterly refunding announcement and the NFP report. Regulatory decisions and ETF rulings still remain the likely catalysts to trigger a meaningful crypto move.

Original Post

Week Ahead – Will US Core CPI Stay at the Lowest Levels Since 2021?
 

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Week Ahead – Will US Core CPI Stay at the Lowest Levels Since 2021?

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Taimur khan
Taimur khan Aug 05, 2023 9:28AM ET
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