Macroeconomics: The Day Ahead for 17 August

US Retail Sales, Industrial Production and NAHB Housing Market Index dominate the day’s schedule once the overnight RBA minutes, Singapore Trade and UK labour data have been digested; there are also the first revision to Eurozone Q2 GDP, with a number of national EU Q2 GDP readings also on tap. A seasonally typical thin events agenda has Fed’s Powell and Kashkari as speakers, while Home Depot and Walmart top the modest run of US corporate earnings, with the UK auctioning 20-yr and Germany 2-yr government debt. The overall narrative for markets remains still very much one of TINA and FOMO ruling the roost, even if concerns about the global growth outlook are clearly a concern ,above all due to the delta variant related activity lockdowns above all in China and Asia more broadly, but this in turn appears to have revived the ‘bad news is good’ meme (i.e. the view that this may prompt the Fed to push back on its tapering timeline). As for Powell’s speech, given the audience, it is unlikely that he will be offering any fresh insights on the policy outlook, particularly as the Jackson Hole conference is now less than 2 weeks away.

U.K. – June/July labour market data

– With the Claimant Count drop slowing to -7.8K from June’s -131.8K, there are some signs that the surge in labour demand is losing some momentum. However the continued strength in HMRC Payrolls (+182K) and another rise in Vacancies to 953K suggests that this has more to do with skills shortages than labour demand tailing off. There remains some way to go in terms of overall labour market slack with the Q2 ILO Unemployment Rate edging down to 4.7% from 4.8%, vs. 2019’s average 3.8%, while the drop in the Claimant Count rate to 5.7% leaves it well above February 2020’s 3.1%. Wages data continue to be heavily distorted by base effects.

U.S.A. – July Retail Sales / Industrial Production

– Auto Sales are again set to drag on headline sales, though somewhat less in relative terms to June, with a drop of -0.2% m/m expected, while gasoline sales should provide some offset (part price related, as this is a value not a volume measure). Retail Sales ex-Autos & Gas are projected to be up 0.2%, but the Control Group measure to fall by 0.2%, with the fact that Amazon’s Prime Day was held early in June likely to weigh, above all on Non-store sales, with a further swing away from Goods back to Services (effectively only represented in this series by Restaurant Sales) likely, as re-opening effects continue to play a significant role in outcomes, and some semblance of the old normal returns. Industrial Production is expected to rise 0.5% m/m, boosted by atypical patterns to re-tooling closures in the auto sector, which should help Manufacturing Output rebound from a 0.1% m/m drop in June to +0.6% m/m, even if seasonal adjustment accounts for some of the rebound, for a sector which remains constrained by raw materials and chip shortages, but continues to try and fill strong demand due to depleted seller inventories. The NHAB Housing Market Index is seen holding steady at an historically lofty 80, with the question being how much rising house prices are starting to restrain demand, despite the super low level of mortgage rates, along with constraints on builders due to relatively high raw material prices, even though lumber futures prices have fallen considerably, and labour shortages.