Macroeconomics: The Day Ahead for 26 August

Given the proximity to tomorrow’s Powell Jackson Hole speech, today’s run of data and events will have to spring some surprises to be anything more than statistical and event road kill. There are Japan’s Services PPI, Germany’s Gfk (again dipping and missing forecasts) and France’s Business Confidence surveys (Manufacturing solid, Services dropping sharply) to digest, while ahead lie Eurozone M3 and lending, Canada’s CFIB Business Barometer, US weekly jobless claims and the first revision to Q2 GDP. There is a goodly volume of ECB speakers, and it will be interesting to see if they stick to the policy signalling from chief economist Lane yesterday, who kicked any discussion of PEPP QE taper into Q4, and thus very likely December, while also noting that the PEPP programme could be terminated quite quickly, because the APP remained in place; the latter prompting a sharp negative market reaction. Interestingly he also hinted strongly that the future volume of QE purchases would be quite heavily dependent on the volume of govt bond issuance – which will likely some criticism from the hawkish wing that this is tantamount to admitting that the ECB is engaged in outright monetary financing. Be that as it may, there are also the minutes from Poland’s NBP policy meeting, which will likely highlight a growing number of MPC members pushing back hard on governor Glapinski’s dovish policy guidance, both given the recovery in the economy, and very obvious and persistent inflation pressures. Last but not least, there is the Bank of Korea’s policy decision to initiate a rate hike cycle with a 25 bps hike to 0.75%, predicated less on a modest upward revision to its inflation forecasts (2021 2.1% vs. prior 1.8%, 2022 seen at a benign 1.5%, with GDP 2021 forecast unrevised at 4.0%), and far more on financial stability concerns related to the rapid build-up in private sector debt). It is a reminder that policy divergence is a clear consideration both in in DM and EM, with some obvious spill-over to FX rates. Govt bond supply comes via way of 2-yr Zeros (CTZ) and 5-yr I-L BTPs in Italy, and US 7-yr, while China again dominates the corporate earnings run (e.g. Muyuan Foods, Ping An Insurance, Sibanye Stillwater), while North America looks to Abercrombie & Fitch, Dell, Dollar General, Marvell Technology, VMwarer, CIBC and Toronto-Dominion Bank.

** U.S.A. – Weekly Jobless Claims / revised Q2 GDP **

– Q2 GDP is expected to be revised up slightly to 6.7% SAAR from 6.5%, on the back of an upward revision of an upward revision to Private Consumption, but it will likely be inventories, initially reported as deducting 1.13 pts, which prove to be the arbiter of the size and direction of any revisions. However this is largely historical, with markets now focussed on the extent of the anticipated slowdown in Q3 Private Consumption; regional Fed Q3 GDPnow estimates vary between 3.5% (NY) to 5.7% (Atlanta). Weekly jobless Claims are seen little changed at 350K vs. prior 348K, breaking a run of four consecutive weekly declines, with the consensus predicated on a more adverse seasonal adjustment (+55K); but it is the volume of all benefit claims which continues to be the ultimate arbiter, still standing at around 12.0 Mln claimants.