Macroeconomics: The Day Ahead for 9 July

Trade tensions remain high, despite the deferral of implementation to August 1 (in theory) from today. The day’s statistical schedule is both minimalist in numerical terms, and unlikely to have much impact, with China’s CPI and PPI to digest ahead of Mexican CPI. The run of events has the RBNZ and Malaysia’s BNM rate decisions to digest ahead of the US June FOMC minutes, some ECB speakers, OPEC’s annual International Seminar that features a number of OPEC Energy Ministers amongst its speakers. It will also be a very busy day for government bond supply, with auctions in UK, Germany, Portugal, Canada and the US amongst others.

** China – June CPI, PPI & Credit Aggregates **

Both CPI (-0.1% y/y) and PPI (-3.2% y/y) are seen little changed, leaving PPI in negative territory for a 33rd month, and with a race to the bottom still ongoing for many consumer goods (most notably autos, household goods and furniture), the risks on CPI are to the downside of the consensus. It remains to be seen whether last week’s anti-trust based initiative to try and stem ‘price wars’ via prohibiting major online retail platforms from forcing sellers to provide services below cost will have an impact. It is, in any case, not due to come into effect until mid-October. Credit aggregates may also be published today or by the end of the week. These always tend to see a boost in the final month of the quarter as banks typically pick up loan issuance, with New Yuan Loans seen up CNY 2.04 Trln and Aggregate Financing expected to jump to CNY 3.80 Trln, with the cut in Reserve Requirement Ratios also likely to have given a boost. However, the overall profile is likely to remain one of weak consumer loan demand, above all for mortgages, and any boost to corporate borrowing more likely to be defensive in many cases given headwinds from trade tensions.

** U.S.A. – June FOMC minutes **

The dot plot for the June meeting showed the median estimate still anticipating two rate cuts in 2025, but also highlighted wider divisions of opinion among FOMC members. In speeches since the meeting both Bowman (once an arch hawk) and Waller have entertained the possibility of a rate cut at the end of July meeting. However last week’s labour data will have likely reinforced the majority view of ‘wait and see’, above all on how tariffs impact upcoming inflation readings, and a weaker than expected July CPI will almost certainly not be enough to shift that majority view  (as summarized by Powell in his semi-annual testimony), particularly given a further tariff implementation delay. The minutes will be of interest in terms of how the various opinions on the FOMC in terms of the trade-off between inflation and employment, particularly the perceived risks on labour demand. But ultimately, the minutes will likely confirm expectations of no change in rates in July.