In what should be a relatively quiet, mid-summer week if only on the global economic schedule even as domestic and global political tensions continue to set the general risk tone on any given day, the focus over the next few days will be on US retail sales on Tuesday and Industria Production on Thursday, as well as on monetary meeting minutes from the Fed and the ECB. Here, focus is on the inflation outlook and discussion of transitory vs persistent factors.
The FOMC minutes will likely show general agreement about the roadmap for balance sheet normalization. Furthermore, a discussion over the neutral rate could be on the table, given the recent Fed talk. We also have the ECB minutes where EU economist focus is on FX and QE after Dec-17. The opening statement by the ECB's chief economist is likely to insist and possibly quantify on the impact of the stronger euro on the inflation outlook. BofA economists also see the potential for remarks on the recent tightening in wider monetary conditions in Europe, and the surge in the Euro.
The US the spotlight is again with retail sales. Consensus expected a 0.4% rebound, implying a strong rebound following a 0.2% decline in June. Industrial production and the manufacturing surveys should, on balance, inch up.
As SocGen's Mihcala Marcusen previews, "we expect a mixed bag on the data front globally, with strong 2Q GDP growth in Germany, Italy and Japan while we see a moderation in Chinese activity data and only a tepid rebound in US retail sales. The Fed and ECB minutes should provide more details on the extent of the discussion on the balance sheet normalisation timing for the Fed and on the QE extension announcement for the ECB"
- United States - Balance sheet start date in focus: Market participants will scour the July FOMC Minutes to see if the start date for the balance sheet normalisation was discussed, or even decided upon. Retail sales will be the main data release this week, as investors try to gauge the strength of the consumer after disappointing spending figures recently and concerns that consumers' budgets may be getting stretched.
- Euro area - Strong 2Q17 GDP growth in Germany and Italy: We expect strong preliminary 2Q17 GDP prints for Germany (SGe 0.9% qoq) and Italy (SGe 0.4% qoq) as well as confirmation of euro area 2Q GDP at 0.6% qoq. The overall robust growth momentum should also be reflected in solid euro area industrial production numbers. The ECB minutes of the July meeting could reveal more on the discussion of exchange rate effects and on the timing for the announcement of QE extension into 2018.
- United Kingdom: Inflation to rise but earnings growth to fall: After a brief dip, CPI inflation should rise from 2.6% to 2.7%. The unemployment rate could fall again from 4.5% to 4.4% but this is very uncertain. Total earnings growth should fall from 1.8% to 1.7%. Retail sales ex auto fuels should rise by 0.5% mom.
DB breaks down key events on a day by day basis:
- Monday starts with the Eurozone’s industrial production (IP) stats for June.
- Onto Tuesday, Japan’s final reading for June IP and capacity utilisation stats as well as German’s preliminary 2Q GDP stats will be due early in the morning. Then UK’s July CPI, PPI and retail price index are due. Over in the US, there will be quite a lot of data, including: July retail sales, import / export price index for July, empire manufacturing stats, NAHB housing market index and US foreign net transactions for June.
- Turning to Wednesday, the Eurozone and Italy’s preliminary 2Q GDP stats are due. Then for UK, we have the July jobless claims and claimant count rate and the June ILO unemployment data. Across the pond, we get the FOMC meeting minutes along with the July housing starts and MBA mortgage applications stats.
- For Thursday, Japan’s July trade balance, exports/ imports data along with France’s ILO unemployment rate will be out early in the morning. Then the Eurozone’s July CPI and UK’s July retail sales are due. In the US, quite a lot of data again, including: July IP, conference board US leading index, the Philadelphia Fed business outlook survey, initial jobless claims and continuing claims stats.
- Finally on Friday, Germany’s PPI will be due early in the morning. Follow by the Eurozone’s June current account stats and construction output data. In the US, various University of Michigan sentiment index are also due
The week's other events include on Wednesday, the NAFTA talks between US, Canada and Mexico kicks off in Washington. Then on Thursday, the ECB will publish the account of its July policy meeting and the Fed’ Kaplan will speak on Thursday and Friday. Finally, notable US companies due to report include: Home depot, Cisco, Target and Wal-Mart. Closer to home, we have RWE reporting.
Finally, looking at only the US, here is Goldman with a full weekly breakdown including consensus estimates:
The key economic data releases this week are retail sales on Tuesday and industrial production on Thursday. There are a few scheduled speaking engagements by Fed officials this week. In addition, the minutes from the July FOMC meeting will be released on Wednesday.
Monday, August 14
- There are no major economic data releases.
Tuesday, August 15
- 08:30 AM Retail sales, July (GS +0.4%, consensus +0.4%, last -0.2%); Retail sales ex-auto, July (GS +0.3%, consensus +0.3%, last -0.2%); Retail sales ex-auto & gas, July (GS +0.4%, consensus +0.4%, last -0.1%); Core retail sales, July (GS +0.5%, consensus +0.4%, last -0.1%): We estimate core retail sales (ex-autos, gasoline, and building materials) rose 0.5% in July, reflecting above-trend growth in the non-store category due to record sales on Amazon Prime Day. We also see scope for re-acceleration in core retail sales, following two consecutive monthly declines. We estimate a relatively firm increase in the ex-auto ex-gas component of 0.4%. A third monthly drop in gas prices should weigh on ex-auto sales, where we forecast a 0.3% increase. We look for a 0.4% increase in the headline measure, boosted by sequential improvement in unit auto sales.
- 08:30 AM Import price index, July (consensus +0.1%, last -0.2%)
- 08:30 AM Empire state manufacturing survey, August (consensus +10.3, last +9.8)
- 10:00 AM Business inventories, June (consensus +0.4%, last +0.3%)
- 10:00 AM NAHB housing market index, August (consensus +64, last +64): Consensus expects the NAHB homebuilders’ index to remain flat after a weaker than expected July report in which the index declined two points. Overall, the homebuilders’ index—which we have found to be a decent leading indicator of housing starts—suggests that the trend in construction activity is slowing, perhaps reflecting the lagged effect of higher mortgage rates.
- 04:00 PM Total Net TIC Flows, June (last +$57.3bn)
Wednesday, August 16
- 08:30 AM Housing starts, July (GS flat, consensus +0.4%, last +8.3%); Building permits, July (consensus +2.8%, last -4.9%): We estimate housing starts were flat in July, reflecting a retracement in multifamily following a 13% rebound in June. While the impact of higher mortgage rates has likely weighed on single family demand and construction this year, we suspect this drag is now waning, particularly given the pullback in mortgage rates since March.
- 02:00 PM Minutes from the July 25-26 FOMC meeting; The July FOMC meeting hinted at a September announcement of balance sheet normalization, by noting in the post-meeting statement that the Committee expects to begin normalization “relatively soon.” The statement made several small tweaks to the description of economic conditions, acknowledging that inflation is now running “below” its 2% target (vs. “somewhat below” in the June statement), while upgrading the characterization of job growth. In the minutes, we will look for further discussion of the soft inflation data and the committee’s views on the weights attached to the inflation misses relative to the risk of a labor market overshoot.
Thursday, August 17
- 08:30 AM Initial jobless claims, week ended August 12 (GS 245k, consensus 240k, last 244k); Continuing jobless claims, week ended August 5 (consensus 1,968k, last 1,951k): We estimate initial jobless claims rose 1k to 245k in the week ended August 12. Initial claims can be particularly volatile around this time of year due to annual auto plant shutdowns, and we expect a rise in factory closures to boost claims for this week. Offsetting this, we note elevated levels of claims in California and South Carolina, which could reverse in the upcoming report. Continuing claims – the number of persons receiving benefits through standard programs – have started to trend down again in recent weeks, following an early-summer rebound.
- 08:30 AM Philadelphia Fed manufacturing index, August (GS +19.0, consensus +18.3, last +19.5): We estimate the Philadelphia Fed manufacturing edged down 0.5pt to +19.0 in August, after the index climbed to a cycle high of 38.8 in May. We expect the index to soften a bit, but likely to levels still consistent with a solid pace of expansion in manufacturing activity.
- 09:15 AM Industrial production, July (GS +0.5%, consensus +0.3%, last +0.4%); Manufacturing production, July (GS +0.4%, consensus +0.3%, last +0.2%); Capacity utilization, July (GS +76.8%, consensus +76.8%, last +76.6%): We estimate industrial production increased 0.5% in July, reflecting solid growth in utilities. We expect manufacturing production rose 0.4% despite a pullback in auto production, reflecting broad cyclical improvement in other manufacturing categories.
- 01:00 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will speak at the Lubbock Chamber of Commerce in Lubbock, Texas. Audience & media Q&A is expected.
- 01:45 PM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a moderated Q&A session at the Edina Rotary Club in Edina, Minnesota. Audience Q&A is expected.
Friday, August 18
- 10:00 AM University of Michigan consumer sentiment, August preliminary (GS 94.4, consensus 94.0, last 93.4): We estimate the University of Michigan consumer sentiment index rose 1.0pt to 94.4 in the August preliminary reading, following two consecutive declines from its May peak. Our forecast reflects mostly firm higher frequency consumer surveys and decent stock market performance over the last two weeks.
- 10:15 AM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will participate in a moderated Q&A at the Dallas County Community College District Conference Day in Dallas, Texas. Audience Q&A is expected.
Source: BofA, DB, Goldman