The coming week will bring plenty of fresh data on the US economy’s progress, and the Fed remains centre stage with chairman Ben Bernanke delivering testimony to Congress
The coming week will bring plenty of fresh data on the US economy’s progress, and the Fed remains centre stage with chairman Ben Bernanke delivering testimony to Congress. Latest FOMC minutes indicated that the Fed is not yet ready to employ further quantitative easing to support the economy, but investors will be looking for any more clues from Bernanke as to the circumstances under which more QE could be forthcoming. Meanwhile, with global economic recovery proving precarious, the IMF is due to update its World Economic Outlook on Monday. Christine Lagarde has already said that the Fund will be downgrading some of its forecasts.
It’s a busy week for US data, kicking off with the July Empire State survey on Monday. Consensus looks for the index to increase to 5.0 after 4.1 in June. The Philly Fed survey for July is due on Thursday. This is also expected to see improvement with an outturn of -6.7 vs -16.6 last month. In between, we have industrial production figures for June on Tuesday. Output is seen increasing by +0.4% month on month.
In Monday’s other key US data, retail sales for June will be released. Headline sales are seen rising by +0.2% month on month, but sales excluding autos are forecast to be flat. June inflation figures follow on Tuesday. Consensus predicts headline CPI to be flat, while core inflation is forecast to rise +0.2% month on month.
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The US housing market will be another key focus of the week beginning with the NAHB survey on Tuesday. The index is expected to edge up slightly to 30 from 29. Starts and permits data will be published on Wednesday. Housing starts are predicted to increase to 745k from 703k, but permits are seen dropping to 775k from 784k. Existing home sales are due on Thursday and are forecast to rise to 4.65m from 4.55m. 4Cast comments that an increase of this magnitude would offset much of the downside from May and would maintain a fairly stable trend.
In amongst the data releases, another key focus of the week in the US will be Fed Chairman Bernanke’s semi-annual testimony to the Senate banking committee, on Tuesday and Wednesday. The market will be particularly looking out for the Fed’s view on recent labour market softness, and the extent to which this is a normal summer slowdown or a more worrisome development. 4Cast thinks the Fed is likely to deliver further easing measures in 4Q12. Meanwhile, the Fed’s Beige Book of economic activity will be published on Wednesday.
Turning to the eurozone, final June inflation figures are due on Monday. The market expects the HICP inflation rate at +2.4% year on year, in line with the flash reading and May’s final outturn. 4Cast says core inflation is expected to fall to 1.5% from 1.6%. The German ZEW survey for July will be published on Tuesday, with 4Cast predicting a deterioration in the economic sentiment index to -25.0 from -16.9 last month.
Back in the UK, June inflation data is out on Tuesday. 4Cast sees CPI stable at 2.8% y/y and flat on the month as seasonal upsides from household equipment and food offset the early high street discounting of clothing and shoes. Says this puts the end-quarter rate at 2.9%, softer than the BoE’s May 2Q forecast of 3.1%.
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The latest jobs report follows on Wednesday. The market is looking for a 10k addition to the June claimant count. HSBC thinks that the risks to unemployment are still to the upside, while wage growth should continue to recover, especially in total pay, as the low-bonus months at the start of the year drop out of the 3m/y/y numbers. UK retail sales will be out on Thursday. Latest public sector borrowing figures are due on Friday. Focus will also be on the Bank of England’s MPC meeting minutes which are up for release on Wednesday. The vote for more QE should have been close to unanimous.
Emma Stevenson – S&P MarketScope, ems@sandp.com
