The Week Ahead: Highlights

Asia-Pacific Preview

RBNZ Rate Cut Expected; Regional Trade Reports Due

By Brian Jackson, Econoday Economist

The Reserve Bank of New Zealand's policy meeting is the highlight of the Asia-Pacific data calendar, with officials widely expected to deliver a 25 basis point rate cut. Officials left policy on hold at their meeting in early July after a cumulative 225 basis points of rate cuts over their previous six meetings, but they indicated then that further policy easing was likely in the near-term.

CPI data published since that meeting showed headline inflation was 2.7 percent in the three months to June, remaining within the target range of 1.0 percent to 3.0 percent for the fourth consecutive quarter, while labour market data showed  an increase in the unemployment rate to 5.2 percent, its highest level since 2020.

The People's Bank of China will also announce the monthly level the loan prime rate next week after the release of key activity data for July this week, and no change is expected.

New Zealand will publish trade data for July, as will Singapore. Data released so far this month show solid growth in exports for China and South Korea and very strong growth for Taiwan's exports in July, amid continued uncertainty about US trade policy.

Europe Preview

PMI Data to Show First Direct Tariff Impacts

By Marco Babic, Econoday Economist

Until now, anyone looking to gauge the impacts of US tariffs on Europe had to glean insights from various indicators that were lagging behind the imposition of tariffs in August. So be sure, some trade and industry data showed inventory stockpiling ahead of the tariffs, which was not unexpected.

On Thursday some of the first data for August in the form of flash PMI readings for the UK, Germany, France, and the Eurozone. The readings for the most part have been undulating around the level of 50, above which marks expansion. This is followed up on Friday with the business climate index for France.

One question is whether the trade deals reached between the US, UK, and European Union will have given businesses some degree of planning clarity. Switzerland is less fortunate and not having secured a trade deal is subject to 39 percent tariffs, the effects of which are starting to be seen in some private indicators such as watch exports. Last week, it was reported the Swiss economy grew only 0.1 percent in the second quarter, slowing from 0.5 percent in the first.

Switzerland also reports its trade data before other economies, and the July results will also be reported Thursday. Most recently, the data have shown businesses building inventories, and a close eye will be cast on pharma and chemical exports along with watch exports.

What's in the Pipeline?

Last week, US PPI shocked to the upside, gaining 0.9 percent in July after being unchanged in June, which is showing tariffs are biting the US economy. This doesn't seem to be the case for the Eurozone and Swiss economies for now. Last week, Swiss consumer prices were down 0.3 percent in July and unchanged from a year-ago. Germany's producer prices were up a tame 0.1 percent in June, and down 1.3 percent on the year. But as the US results show, this can change rapidly.

Germany, Europe's largest economy, reports its second quarter GDP on Friday. During the first quarter, it remained in a precarious state, falling 0.1 percent from the previous quarter and gaining only 0.4 percent from its year-ago level.

The data have certainly been in limbo between April and August, with deductions having been made from trade and inventory data on how tariffs might be affecting the global economy. With the first high-frequency data starting to come out, perhaps the contours of a roadmap will begin to emerge.

US Preview

Fed's Powell on the Hot Seat in Jackson Hole

By Theresa Sheehan, Econoday Economist

The economic data in the August 18 week will not distract from anticipation of Fed Chair Jerome Powell's speech on Friday, August 22 at 10:00 ET at the Kansas City Fed's annual Jackson Hole forum.

Powell faces a daunting task.

In other circumstances, this speech could well have been a platform to talk about the Fed's five-year review of monetary policy and announce some of the major changes - if any - in the Fed's statement on longer-run goals and monetary policy. It got a big update in 2020 including the introduction of the flexible average inflation target. After the recent inflation episode, that is likely to get a bit of refinement along with some other lessons learned from the impacts of the pandemic and subsequent economic recovery.

Powell will probably talk about the five-year review and some conclusions from the round of Fed Listens events held earlier this year. He may even decide to focus on it and minimize his comments about monetary policy. He will almost certainly reiterate that the FOMC is data dependent, that there is a lot of data between now and the next meeting, that the current crop of data allows the FOMC to remain cautious and await fresher information, that fiscal policy is unsettled, and that monetary policy is not on a preset course.

This year, however, Powell is facing threats to the independence of the central bank, a series of economic data reports that have not clarified the monetary policy outlook, and a highly uncertain outlook for growth while businesses and consumers navigate the choppy waters created by the Trump administration's actions.

The release of the minutes of the July 29-30 FOMC at 14:00 ET on Wednesday could provide some clue about how much sympathy the dissent in the vote by Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman had among the 19 FOMC participants, not just the 12 voters (11 since Governor Adriana Kugler did not vote).

Powell has often said that no decision is made prior to the FOMC meeting, but remarks from Waller and Bowman in the weeks prior suggested that their decision was predetermined. There is a valid argument that the current upward price pressures from tariffs will probably not spark another round of persistent inflation and/or for some easing in policy to preempt further softening in the labor market. Nonetheless, the majority of FOMC voters are more patient in awaiting development to ensure that policy decisions are appropriate.

The minutes will tell us more about FOMC participants' thinking three weeks ago but cannot encompass more recent data. This includes the release of the July employment report on August 1 and the July CPI on August 12. The two reports indicate that the "tension" in the dual mandate between maximum employment and price stability may be increasingly hard to resolve.

In any case, when Powell gives his remarks at Jackson Hole, he will have to defend the July 30 decision to not lower rates, lay out the case for a cut - or not - at the September meeting, smooth over perceptions that the Board of Governors is subject to political influence, and generally assure financial markets that there is a steady hand at the Fed's helm.

The Week Ahead: Econoday Consensus Forecasts

Monday

Eurozone Merchandise Trade for June (Mon 1100 CEST; Mon 0900 GMT; Mon 0500 EDT)

Consensus Forecast, Balance: E14.2 B

Consensus Range, Balance: E14.0 B to E14.7 B

The surplus is expected down at E14.2 billion for June versus E16.2 billion in May

Canada Housing Starts for July (Mon 0815 EDT; Mon 1215 GMT)

Consensus Forecast, Annual Rate: 270K

Consensus Range, Annual Rate: 251K to 281K

Starts are expected to correct lower to 270,000 in July after recovering for several months to a recent high of 283,734 in June.

United States Housing Market Index for August (Mon 1000 EDT; Mon 1400 GMT)

Consensus Forecast, Index: 33

Consensus Range, Index: 32 to 34

The consensus forecast looks for no bounceback in gloomy homebuilder sentiment with the index flat at 33 in August from 33 in July.

Tuesday

Canada CPI for July (Tue 0830 EDT; Tue 1230 GMT)

Consensus Forecast, CPI - M/M: 0.4%

Consensus Range, CPI - M/M: 0.4% to 0.5%

Consensus Forecast, CPI - Y/Y: 1.9%

Consensus Range, CPI - Y/Y: 1.6% to 2.0%

Forecasters see CPI rising at the same 1.9 percent rate on year in July as in June. CPI is seen up 0.4 percent on the month after increasing 0.1 percent in June. The recent end to the carbon tax makes the numbers tricky to parse. Gas prices are expected down but tariff effects on cars and food are working in the other direction along with domestic services,

United States Housing Starts and Permits for July (Tue 0830 EDT; Tue 1230 GMT)

Consensus Forecast, Starts - Annual Rate: 1.290 M

Consensus Range, Starts - Annual Rate: 1. 260 M to 1.351 M

Consensus Forecast, Permits - Annual Rate: 1.390 M

Consensus Range, Permits - Annual Rate: 1.350 M to 1.400 M

With housing stuck in the doldrums, the consensus sees housing starts down at a 1.290 million rate in July from 1.321 million in June. Permits are seen at 1.390 million in July versus 1.397 million in June.

Wednesday

Japan Merchandise Trade for July (Wed 0850 JST;Tue 2350 GMT; Tue 1950 EDT)

Consensus Forecast, Balance: ¥145.85 B

Consensus Range, Balance: ¥-80.60 B to ¥326.10 B

Consensus Forecast, Imports - Y/Y: -10.0%

Consensus Range, Imports - Y/Y: -11.1% to -7.3%

Consensus Forecast, Exports - Y/Y: -2.0%

Consensus Range, Exports - Y/Y: -3.5% to -1.0%

Key forecast points:

--Japanese export values -2.0%, the third straight y/y drop in July -0.5% in June and -1.7% (the first decline in eight months) in May. Japanese carmakers are reducing the prices for U.S. customers to cover high Trump import tariff costs and thus to protect their market share, exerting downward pressures on overall export prices, but the volumes of Japan's exports to the world have been on an uptrend. The decline in July export values is expected to be led by autos, iron and steel and auto parts.

--Import values -10.0% after marking an unexpected rise in June (+0.2%) and slumping 7.7% in May. The decrease is seen driven by continued declines in prices for crude oil and coal as well as in payback to recent higher drug purchases.

--The trade balance: a surplus of ¥145.85 billion vs. a downwardly revised ¥152.12 billion surplus in June (the first black ink in three months) and a ¥628.34 billion deficit recorded in July 2024.

Japan Machinery Orders for June (Tue 0850 JST; Mon 2350 GMT; Mon 1950 EDT)

Consensus Forecast, M/M: 1.5%

Consensus Range, M/M: -1.8% to 4.5%

Consensus Forecast, Y/Y: 6.8%

Consensus Range, Y/Y: 1.4% to 9.1%

Key forecast points:

--Japanese core machinery orders, the key leading indicator of business investment in equipment and software, are forecast to post their first increase in three months in June, up 1.5% on the month, led by continued solid demand for computers in a move to digitize operations amid widespread labor shortages. It would follow a slight 0.6% dip in May, a 9.1% plunge in April and a 13.0% surge in March.

--In the April-June quarter, the core measure is forecast by economists to show a slight 0.2% dip on quarter after rising 3.9% in January-March and rebounding 2.3% in October-December, which would be firmer than the official projection of a 2.1% drop.

--Last month, the Cabinet Office maintained its assessment after upgrading it in the November report, saying, "Machinery orders are showing signs of a pickup."

--From a year earlier, core orders, which track the private sector and exclude volatile orders from electric utilities and for ships, are expected to mark their ninth consecutive gain, up 6.8%, following a 4.4% rise the previous month.

China Loan Prime Rate for August (Tue 0900 CST; Mon 0100 GMT; Mon 2100 EDT)

Consensus Forecast, 1-Year Rate - Change: 0 bp

Consensus Range, 1-Year Rate - Change: 0 bp to 0 bp

Consensus Forecast, 1-Year Rate - Level: 3.0%

Consensus Range, 1-Year Rate - Level: 3.0% to 3.0%

Consensus Forecast, 5-Year Rate - Change: 0 bp

Consensus Range, 5-Year Rate - Change: 0 bp to 0 bp

Consensus Forecast, 5-Year Rate - Level: 3.5%

Consensus Range, 5-Year Rate - Level: 3.5% to 3.5%

The consensus looks for no change this time on both 1-year and 5-year LPR.

New Zealand RBNZ Announcement (Wed 1400 NZST; Wed 0200 GMT; Tue 2200 EDT)

Consensus Forecast, Change: -25 bps

Consensus Range, Change: -25 bps to -25 bps

Consensus Forecast, Level: 3.00%

Consensus Range, Level: 3.00% to 3.00%

The RBNZ held rates steady in July but officials said easing was coming soon if the economy developed as expected. The consensus now looks for a 25 bp rate cut as inflation pressures have continued to ease in line with the bank's forecast.

United Kingdom CPI for July (Wed 0700 BST; Wed 0600 GMT; Tue 0200 EDT)

Consensus Forecast, M/M: 0.0%

Consensus Range, M/M: -0.1% to 0.2%

Consensus Forecast, Y/Y: 3.7%

Consensus Range, Y/Y: 3.7% to 4.0%

UK annual inflation seen even higher at 3.7 percent in July after an upside surprise at 3.6 percent in June. Month on month, the consensus looks for a flat reading after increasing 0.3 percent in June. Food and service prices are seen boosting the CPI despite lower energy bills.

Germany PPI for July (Wed 0800 CEST; Wed 0600 GMT; Wed 0200 EDT)

Consensus Forecast, M/M: 0.1%

Consensus Range, M/M: -0.2% to 0.1%

Wholesale prices are seen up 0.1 percent again on the month in July after rising 0.1 percent in June.

Eurozone HICP for July (Wed 1100 CEST; Wed 0900 GMT; Wed 0500 EDT)

Consensus Forecast, HICP - Y/Y: 2.0%

Consensus Range, HICP - Y/Y: 2.0% to 2.0%

Consensus Forecast, Narrow Core - Y/Y: 2.3%

Consensus Range, Narrow Core - Y/Y: 2.3% to 2.3%

Forecasters expect no revision in HICP from the flash at 2.0 percent and 2.3 percent for narrow core.

Thursday

Germany PMI Composite Flash for August (Thu 0930 CEST; Thu 0730 GMT; Thu 0330 EDT)

Consensus Forecast, Manufacturing Index: 48.7

Consensus Range, Manufacturing Index: 48.5 to 49.8

Consensus Forecast, Services Index: 50.3

Consensus Range, Services Index: 50.0 to 50.5

Manufacturing expected down at 48.7 in the August flash compared with 49.1 in the July final. Services is expected at 50.3 versus 50.6 in the July final.

Eurozone PMI Composite Flash for August (Thu 1000 CEST; Thu 0800 GMT; Thu 0400 EDT)

Consensus Forecast, Manufacturing Index: 49.5

Consensus Range, Manufacturing Index: 49.5 to 49.7

Consensus Forecast, Services Index: 50.7

Consensus Range, Services Index: 50.7 to 50.9

The consensus sees manufacturing at 49.5 in the August flash compared with 49.8 in the July final. Services is expected at 50.7 versus 51.0 in the July final.

United States Jobless Claims for Week 8/16 (Thu 0830 EDT; Thu 1230 GMT)

Consensus Forecast, Initial Claims - Level: 224 K

Consensus Range, Initial Claims - Level: 220 K to 230 K

Claims seen flat at 224K from 224K in the previous week. That tops the 4-week moving average last at 221.75K.

United States Philadelphia Fed Manufacturing Index for August (Thu 0830 EDT; Thu 1230 GMT)

Consensus Forecast, Index: 8.0

Consensus Range, Index: 2.0 to 13.3

The index, an early read on business in the manufacturing sector for August, is expected to show continued expansion -- but slower -- at 8.0 in August from 15.9 in July and versus minus 4.0 in June.

United States S&P PMI Composite Flash for August (Thu 0945 EDT; Thu 1345 GMT)

Consensus Forecast, Manufacturing Index: 49.7

Consensus Range, Manufacturing Index: 49.5 to 50.0

Consensus Forecast, Services Index: 53.0

Consensus Range, Services Index: 53.0 to 54.0

The PMI manufacturing index is expected to remain marginally in contraction at 49.7 in the first read for August versus 49.8 in July final. Services seen at 53.0 versus 55.7 in July.

United States Existing Home Sales for July (Thu 1000 EDT; Thu 1400 GMT)

Consensus Forecast, Annual Rate: 3.90 M

Consensus Range, Annual Rate: 3.80 M to 3.99 M

Sales expected to remain depressed at an annual 3.90 million unit rate in July compared with 3.93 million in June as consumers stay cautious and affordability remains a big problem.

United States Leading Indicators for July (Thu 1000 EDT; Thu 1600 GMT)

Consensus Forecast, M/M: -0.1%

Consensus Range, M/M: -0.2% to 0.1%

More erosion in the economic outlook expected with the leading index down 0.1 percent, reflecting weak consumer confidence, rising jobless claims and falling manufacturing new orders.

Friday

Japan CPI for July (Fri 0830 JST; Thu 2330 GMT; Thu 1930 EDT)

Consensus Forecast, Y/Y: 3.1%

Consensus Range, Y/Y: 3.0% to 3.3%

Consensus Forecast, Ex-Fresh Food -Y/Y: 3.1%

Consensus Range, Ex-Fresh Food - Y/Y: 3.0% to 3.3%

Consensus Forecast, Ex-Fresh Food & Energy - Y/Y: 3.4%

Consensus Range, Ex-Fresh Food & Energy - Y/Y: 3.3% to 3.4%

Key forecast points:

--Consumer inflation in Japan is expected to ease further in July to just above 3% in key measures, thanks to retail gasoline subsidies and the yen's rise from last year's slump that has lowered import costs and sparked a pullback in spending by visitors from overseas who lost their currencies competitive edge against the yen. The impact of slowing overall energy price gains (gasoline is down) was mitigated by elevated processed food prices despite gradually easing domestic rice supply shortages.

--The core reading (excluding fresh food) is forecast to post a 3.1% rise on year in July after its annual rate decelerated to 3.3% in June from 3.7% in May. The year-on-year rise in the total CPI is also seen at 3.1%, easing further from 3.3% in June and 3.5% the prior month. The underlying inflation measured by the core-core CPI (excluding fresh food and energy) is estimated at 3.4% after rising to a 17-month high of 3.4% from 3.3%.

Germany GDP for Second Quarter (Fri 0800 CEST; Fri 0600 GMT; Fri 0200 EDT)

Consensus Forecast, Q/Q: -0.1%

Consensus Range, Q/Q: -0.1% to -0.1%

Consensus Forecast, Y/Y: 0.4%

Consensus Range, Y/Y: 0.4% to 0.4%

The consensus looks for German GDP down 0.1 percent in Q2 from Q1. Year on year GDP is expected up 0.4 percent.

Canada Retail Sales for June (Fri 0830 EDT; Fri 1230 GMT)

Consensus Forecast, M/M: 1.6%

Consensus Range, M/M: 1.6% to 1.7%

Sales expected at up 1.6 percent in June, as Statistics Canada projected, after falling by 1.1 percent in May. A chunk of this reflects a 2.2 percent jump in auto prices. Core sales, ex-autos and gas, are also expected up strongly on the month.