Macroeconomics: The Day Ahead for 1 September

While Manufacturing PMIs dominate the first day of the new month, there is a very busy schedule of other data to work through, With Australia’s better than expected Q2 GDP (flagged in advance by Govt Spending and CapEx data), Japan’s Q2 CapEx, South Korea Trade, UK BRC Shop Prices & Nationwide House Prices and typically volatile German Retail Sales to digest from the overnight session. Ahead lie Turkish and Brazilian Q2 GDP, while US has ADP Private Employment, Construction Spending and Auto Sales. In event terms there is the OPEC+ production meeting, the expectation is that the group will stick with the very hard won agreement to increase output by 400K bbls per month, after what has been a fairly wild ride for oil prices in recent weeks, culminating in last week’s sharp rebound. The ECB’s hawks will be out in force at today’s Bundesbank symposium, with Weidmann, Holzmann and Knot all speaking, and will doubtless reiterate calls for tapering to start in Q4 or latest; interestingly even doves like de Guindos are talking up the ECB’s September economic forecasts, and noting in the interview with Confidencial “We (the ECB) will have new projections in the coming days and will take our decisions accordingly”. Bostic is the sole Fed speaker, though his views have already been well documented, and his topic is not policy related. Govt bond auctions see UK sell 2029 and Germany 2026.

** World – Aug Manufacturing PMIs/ISM **

– The focus in terms of PMIs will be on any revisions to what were somewhat disappointing dips in a number of G7 flash PMIs, with the swathe of Asian PMIs weakening or slipping into contraction territory due to the various lockdown measures, which are also expected to see China’s Service PMIs drop back quite sharply from July levels, while Italy and Spain should see the strength of recent months sustained. Given that the bulk of the regional Fed manufacturing surveys dropped off quite sharply, thanks to the array of supply chain disruptions, the risks would appear to be to the downside of an expected 3rd consecutive monthly dip to 58.5 from 59.5, with Prices Paid only seen easing marginally to 84.0 from 85.7, while orders are also seen slipping to a still robust 61.0 from 64.9, the latter will be a focal point along with inventories and supplier deliveries.

** U.S.A. – Aug ADP Employment / Auto Sales **

– The lack of a read across from the ADP Employment report is well evidenced by the attached chart highlighting it has been wide of Private Payrolls by at least 200K in 5 of the past 6 months, with forecasts looking for a rbound to 638K after posting a disappointing 330K gain in July (as against Private Payrolls at 703K. Those well documented supply chain problems and resultant low inventories are expected to push US Auto Sales down for a fourth month to a SAAR pace of 14.50 Mln vs. July’s 14.75 Mln, with risks skewed to the downside, even though actual demand remains high. Construction Spending has slowed in recent months and is seen posting only a modest 0.2% m/m gain for July, as skilled labour shortages, high raw materials prices and a dearth of suitable plots to build on combine to dampen activity.