Written Commentary
US PPI tops busier run of data; Japan PPI, Australia Q2 Wages and UK labour market report to digest; German ZEW and US NFIB surveys, IEA Oil Market Report, Fed’s Bostic, German 2-yr, UK 14-yr
UK: sharp fall in wage growth mostly due to base effects, modest increase in Payrolls, no change in Unemployment
Germany ZEW: outlier risk heightened after equity roller coaster
US PPI: well contained m/m rise, core dependent on offset to portfolio management fees from airfares and trade
EVENTS PREVIEW
The week’s macro schedule cranks into first gear with Japan’s PPI, Australian Q2 Wages and UK labour market data to digest, while ahead lie the German ZEW and US NFIB surveys, with US PPI headlining as the first of this week’s inflation prints. A modest run of corporate earnings has Henkel, Home Depot and Brazil’s JBS amongst others. Atlanta Fed’s Bostic is the sole central bank speaker scheduled, while the IEA rounds off the run of monthly Oil Market Reports, and follows a modest reduction (135K bbls) in OPEC oil demand growth, but at 2.1 Mln bbls this is still more than double the IEA estimate, and also could potentially flag a reversal or a revision to its plans to gradually increase production. Govt bond sales take the form of German 2-yr and UK 14-yr.
** U.K. – June/July labour data **
– Labour data kick off the busy run of UK statistics, with a sharp fall in headline Average Earnings to 4.6% y/y from 5.7%, and a more moderate 0.3 ppt drop to 5.4% y/y for the ex-Bonus measure expected. Base effects will account for much of the fall, but even accounting for these, Private Sector pay (last 5.6% y/y) should drop close to the BoE’s forecast of 5.1% y/y, which while still high, would signal a very clear downtrend, that is set to continue if yesterday’s CPD survey suggesting employers are looking to lower settlements of 3.0% y/y. The Unemployment Rate is seen rising 0.1 ppt to 4.5%, having been as low as 4.0% in January, while July HMRC Payrolls are expected to slow modestly to just 10K vs. June’s 16K, though the series is very frequently heavily revised, while the much-maligned LFS Employment for Q2 is expected to post a marginal -5K fall.
** Germany – August ZEW Expectations **
– Germany’s ZEW survey will be heavily subject to potential data collection timing effects, with the roller coaster ride in equities last week anticipated to have prompted relatively sharp setbacks in both Expectations to 31.8 from 41.8, and the Current Situation to -75.0 from -68.9. Whether better or worse than forecast, the survey’s value as economic indicator remains tenuous at best, with Expectations generally only mirroring the m/m performance of the Dax.
** U.S.A. – July PPI, NFIB Small Business Optimism **
– PPI is seen up 0.2% m/m on headline and core, which would see y/y rates fall by 0.3 ppt to 2.3% and 2.7%. At the core level much will depend on the extent to which the upward pressure on Portfolio Management Fees, which has been a wildcard for many months for both PPI and core PCE, are offset by airfares and trade (logistics prices). Ahead of PPI, NFIB Small Business Optimism is forecast to be unchanged at 91.5, whereby the already published employment sub-indices saw Plans to Hire steady at 15%, though Compensation plans fell to their lowest since March. Much will depend on the Economic Outlook sub-index, which has climbed sharply over the past two months to -25 as against -37 as recently as May.
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