- Digesting run of Japan data, UK Consumer Confidence drop and robust
European Q2 GDP readings, awaiting German CPI, US Q2 advance GDP and
Employment Cost Index, as oil major dominate US earnings schedule;
month end flows also in view
- Europe - Q2 GDP readings underline robust and broad based growth
momentum, but CPI likely to point to still very sub-par trend
- US Q2 GDP: personal consumption rebound seen pacing Q2 pick-up,
Goods trade data point to substantial upside risks relative to
consensus
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** EVENTS PREVIEW **
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So to end the week there is a barrage of economic data from around the world to accompany another raft of European and US corporate earnings, with Fed ueber dove Kashkari offering the first Fed speak since the FOMC meeting, and month end flows also in view. Provisional GDP readings in France, Spain, Austria. Sweden, Taiwan and of course the USA will vie with provisional national CPI data in the Euro area from France, Spain and Germany, with the EC's monthly confidence surveys and Canadian monthly GDP also due, as the overnight run of Japanese CPI, Unemployment and personal consumption data are digested.
** Germany, France, Spain - July provisional CPI/HICP **
- Today's run of inflation data are expected to underline that there are as yet few signs that Euro area inflation is clearly on a sustained path back to the ECB's target of "just below 2.0%". French HICP was in line with forecasts at -0.4% m/m for an unchanged reading of 0.8% y/y, with Spain also unchanged at 1.6% y/y, having been as high as 3.0% in February. This leaves the focus on German HICP, where a 0.3% m/m rise would see the y/y rate dip back to 1.4% from 1.5%, having at 2.0% in April and 2.2% in February. As such the ECB's vary cautious approach to its expected tapering as of H1 2018 appears more than understandable, particularly as Monday's Eurozone Core CPI is seen unchanged at 1.1% y/y, with headline forecast to dip to 1.2%. By contrast, the day's provisional Q2 GDP readings - France 0.5% q/q 1.8% y/y, Spain 0.9% q/q 3.1% and perhaps most impressively Sweden at 1.7% q/q, and Austria also 0.9% q/q vs. an upwardly revised 0.7% in Q1 - underline the very solid growth momentum across the Eurozone and EU, though with Unemployment still very high at 9.3%, there remains plenty of labour market slack, above all in the likes of France, Italy & Spain.
** U.S.A. - Q2 prov. GDP **
- Yesterday's better than expected Trade data and upward revision to May Durable Shipments has prompted a few forecasters to tweak their estimates for today's advance Q2 GDP reading marginally higher to 2.7% from 2.5%. That said, the primary driver of the improvement relative to Q1 is expected to be a rebound in Personal Consumption to 2.8% from a lowly 1.1% in Q1. However the relatively sharp narrowing of the Trade deficit, suggests that Net Exports may well end up being a modest (0.1/0.2 ppt) net contributor to Q2 GDP, and with Business Investment (above all in structures) seen potentially accelerating from a robust 7.8% in Q1, the risks point to a substantially higher than expected reading, say as much as 3.5% SAAR. Housing Investment is however likely to have decelerated from a weather related boost in Q1, with Inventories as ever likely to be the big wild card, though the consensus appears to be for a modest positive contribution of between 0.2 and 0.3 ppts. Given market scepticism on the Fed's rate outlook, there will be plenty of attention given to the core PCE deflator which is expected to decelerate quite sharply to just 0.7% from 2.0% in Q1, while the accompanying Q2 Employment Cost Index is projected to slip back to its trend quarterly rate of 0.6% after jumping to 0.8% in Q1, again underlining that while wages have picked up over the past year, they are hardly suggesting any substantial build-up of wage pressures, despite a clearly very tight labour markets.
from Marc Ostwald
