Macroeconomics: The Day Ahead for 23 July

There is a busier data schedule, though it will be the flash G7 PMIs which will dominate proceedings, with UK GfK Consumer Confidence and Retail Sales to digest, ahead of Brazil’s IPCA-15 inflation and Canada’s Retail Sales. The events schedule is fairly sparse with the ECB survey of Professional forecasters following on from a rather anti-climactic ECB meeting, and an expected rate hike in Russia providing the highlights, along with USDA livestock S&D reports. Corporate earnings highlights are likely to include Amex, Citrix, Kimberly-Clark, NextEra Energy and Schlumberger. Next week brings end of month, an FOMC meeting and a much busier run of statistics, and it will be peak weak for US S&P 500 corporate earnings, with more than 200 companies reporting, and also a busy week elsewhere for earnings. Advance Q2 GDP readings for the US, Eurozone, France, Germany, Italy, Spain and South Korea top the run, with the US also looking to Durable Goods, Consumer Confidence, House Prices, New & Pending Home Sales, Personal Income & PCE. In the Eurozone, there are the usual end of month array of CPI readings, Germany’s Ifo & GfK surveys and Unemployment, while France has Consumer Spending. Japan has flash PMIs, Industrial Production, Retail Sales and Unemployment, while China has its NBS PMIs, and Canada looks to CPI and monthly GDP. Also in view will be whether the US Congress passes either an extension of the Debt Ceiling suspension or raises it.

** G7 – July flash PMIs **

  Flash PMI data will be the day’s focal point, with consensus estimates looking for manufacturing and services readings in the Eurozone, UK and US to dip modestly to what would still be very robust levels; but if correct, this will play into concerns that the recovery is plateauing in Europe and North America. The key question is whether there will be any meaningful easing of price and supplier delivery pressures, and how these compare with orders and production trends, judging by the national surveys the latter should remain robust, while prices pressures may show some signs of easing, but remain extremely high by any historical standard.

** U.K. – June Retail Sales / GfK Consumer Confidence**

Headline Retail Sales were somewhat better than expected at 0.5%, with Auto Fuel sales accounting for the bulk of the miss relative to forecasts, and food store sales shining at 4.2% m/m boosted by Euro 2020, but the later also weighing on household goods and clothing sales, with Non-Food Stores posting a 1.7% m/m drop. While the 3mth/3mth comparison shows a strong rise of 12.2% q/q, the bulk of this happened in April, and per se suggests that pent-up demand in retail has largely dissipated, though leisure and entertainment services are probably taking some demand from consumer goods spending. While the GfK Consumer Confidence is back at its pre-pandemic level at -7 (vs. June -9), the Jul1-14 survey period probably did not capture any ‘pingdemic’ effects. Within the details, it is encouragingly worth noting that the Large Purchases climate jumped to +2 from -5, though there is considerable offset from the fact that the 1 yr Economic Outlook fell for a second month to -5 from -2 in June and a recent peak of +4 in May.

** Russia – Bank Rossi rate decision **

Having already raised rates by a total of 125 bps since April, Bank Rossi is today expected to get very aggressive and hike rates by a further 100 bps to 6.50, as it seeks to rein in stubbornly high inflation (June headline 6.5%, core 6.6%). Given that inflation expectations are also running away with themselves (see attached chart), Nabiullina will almost certainly signal that further hikes are on the agenda, even if the stronger than expected recovery in H1 is now looking rather more patchy, with personal consumption fading somewhat, though the energy sector remains robust.