Highlights
The US data calendar is relatively thin this week after the stock markets were hit by a couple of shock waves, first by a surprisingly weak report on what purchasing mangers are saying about sluggish orders and job cuts in the manufacturing sector, and then by an unexpected uptrend in the unemployment rate. Ahead of those data releases, Federal Reserve Chair Jerome Powell told a post-FOMC meeting news conference that a rate cut could be on the table at the September (17-18) meeting if inflation eases largely in line with expectations, growth remains reasonably strong and the labor market remains consistent with current conditions.
Fed policymakers are now back to a closer to even focus on ensuring both maximum employment and stable prices, he said, and they will be looking at labor market conditions and asking whether we're getting what we're seeing and are prepared to respond if we see that it's not what we wanted to see, which was a gradual normalization of conditions.
Timothy Fiore, chair of the Institute for Supply Management (ISM) manufacturing business survey committee, told reporters the following day that he believes the manufacturing sector is stuck in a temporary trough, instead of diving into a new phase of contraction. But he also warned that even if the Federal Reserve lowers its policy interest rate in September, as widely expected, new orders are unlikely to pick up for several months.
This week on the policy front, the Reserve Bank of Australia on Tuesday is set to leave its policy rate unchanged at 4.35 percent for a sixth straight meeting after raising it by 25 basis points to the current level in November 2023. In its June meeting statement, the RBA repeated that inflation was easing more slowly than expected and still high. The board expects that it will be some time yet before inflation is sustainably in the target range (of 2 to 3 percent). Governor Michele Bullock told reporters that the board did discuss the case for increasing interest rates but that the case for a cut was not considered. The CPI data for April-June released last week showed the annual consumer inflation rate rose to 3.8 percent from 3.6 percent in the previous quarter while inflation moderated to 3.8 percent in July from 4.0 percent in June in the monthly CPI data.
The Reserve Bank of India is also expected, on Thursday, to hold rates steady for a ninth straight meeting. The bank's Monetary Policy Committee decided in a 4-to-2 vote to leave its policy rate unchanged at 6.50 percent in June, compared to a 5-to-1 vote in April, showing two members now called for a rate cut by 25 basis points. Market expectations are that a rate cut may come in the October-December quarter.
In a holiday-shortened week, Canada's jobs data is expected to show the unemployment rose further to 6.5 percent in July after rising to an above-forecast 6.4 percent in June from 6.2 percent in May, up 1.3 percentage points since April 2023. The year-on-year increase in average hourly wages is expected to slow to around 5.0 percent in July after accelerating to 5.4 percent in June from 5.1 percent in May. Those figures would support the Bank of Canada's second consecutive 25 basis point rate cut in July and set the stage for more cuts this year.
On Monday, the final reading of India's purchasing managers' index (PMI) for the services sector is expected to show little change to the initial data. The services PMI rose to 61.1 in July from 60.5 in June while the composite index climbed to 61.4 in July from 60.9 in June. The manufacturing PMI rose to a preliminary 58.5 in July from 58.3 in June but was later revised down to 58.1.
In the Eurozone, producer prices have shown sustained weakness and are expected to fall 3.5 percent on the year in June, which would compare with 4.2 percent contraction in May. The monthly showing, at a consensus gain of 0.4 percent in June, fell 0.2 percent in May, which was a seventh straight decline.
The US PMI data for July is expected to see no change at the mid-month's 56.0 for the services sector which was up from the final reading of 55.3 in June.
The ISM services sector index is expected to show a rebound to 51.0 in July, above the neutral line of 50, after it unexpectedly slipped back into a second contraction in three months in June, falling 5.0 points to 48.8 in June, the lowest since 45.4 in May 2020. Activity/production posted its biggest plunge since the early phase of the pandemic slump and new orders slumped to post its first contraction since December 2022.
San Francisco Federal Reserve Bank President Mary Daly will discuss monetary policy and economic trends before a moderated conversation hosted in partnership with the Hawaii Executive Collaborative at 5 p.m. EDT (2100 GMT).
Japan's real household spending is forecast to post its second straight year-over-year drop in June, down 1.0 percent, as consumers remain frugal amid elevated costs, but the decline is seen slowing from an unexpected 1.8 percent slump in May after April's slight 0.5 percent gain, which was the first rise in 14 months. A late start to the rainy season in many regions and hot weather boosted demand for air conditioners, beverages and summer clothing. On the month, real average expenditures by households with two or more people are expected to mark a second consecutive rise, up 0.3 percent on a seasonally adjusted basis, after dipping 0.3 percent.
Fed policymakers are now back to a closer to even focus on ensuring both maximum employment and stable prices, he said, and they will be looking at labor market conditions and asking whether we're getting what we're seeing and are prepared to respond if we see that it's not what we wanted to see, which was a gradual normalization of conditions.
Timothy Fiore, chair of the Institute for Supply Management (ISM) manufacturing business survey committee, told reporters the following day that he believes the manufacturing sector is stuck in a temporary trough, instead of diving into a new phase of contraction. But he also warned that even if the Federal Reserve lowers its policy interest rate in September, as widely expected, new orders are unlikely to pick up for several months.
This week on the policy front, the Reserve Bank of Australia on Tuesday is set to leave its policy rate unchanged at 4.35 percent for a sixth straight meeting after raising it by 25 basis points to the current level in November 2023. In its June meeting statement, the RBA repeated that inflation was easing more slowly than expected and still high. The board expects that it will be some time yet before inflation is sustainably in the target range (of 2 to 3 percent). Governor Michele Bullock told reporters that the board did discuss the case for increasing interest rates but that the case for a cut was not considered. The CPI data for April-June released last week showed the annual consumer inflation rate rose to 3.8 percent from 3.6 percent in the previous quarter while inflation moderated to 3.8 percent in July from 4.0 percent in June in the monthly CPI data.
The Reserve Bank of India is also expected, on Thursday, to hold rates steady for a ninth straight meeting. The bank's Monetary Policy Committee decided in a 4-to-2 vote to leave its policy rate unchanged at 6.50 percent in June, compared to a 5-to-1 vote in April, showing two members now called for a rate cut by 25 basis points. Market expectations are that a rate cut may come in the October-December quarter.
In a holiday-shortened week, Canada's jobs data is expected to show the unemployment rose further to 6.5 percent in July after rising to an above-forecast 6.4 percent in June from 6.2 percent in May, up 1.3 percentage points since April 2023. The year-on-year increase in average hourly wages is expected to slow to around 5.0 percent in July after accelerating to 5.4 percent in June from 5.1 percent in May. Those figures would support the Bank of Canada's second consecutive 25 basis point rate cut in July and set the stage for more cuts this year.
On Monday, the final reading of India's purchasing managers' index (PMI) for the services sector is expected to show little change to the initial data. The services PMI rose to 61.1 in July from 60.5 in June while the composite index climbed to 61.4 in July from 60.9 in June. The manufacturing PMI rose to a preliminary 58.5 in July from 58.3 in June but was later revised down to 58.1.
In the Eurozone, producer prices have shown sustained weakness and are expected to fall 3.5 percent on the year in June, which would compare with 4.2 percent contraction in May. The monthly showing, at a consensus gain of 0.4 percent in June, fell 0.2 percent in May, which was a seventh straight decline.
The US PMI data for July is expected to see no change at the mid-month's 56.0 for the services sector which was up from the final reading of 55.3 in June.
The ISM services sector index is expected to show a rebound to 51.0 in July, above the neutral line of 50, after it unexpectedly slipped back into a second contraction in three months in June, falling 5.0 points to 48.8 in June, the lowest since 45.4 in May 2020. Activity/production posted its biggest plunge since the early phase of the pandemic slump and new orders slumped to post its first contraction since December 2022.
San Francisco Federal Reserve Bank President Mary Daly will discuss monetary policy and economic trends before a moderated conversation hosted in partnership with the Hawaii Executive Collaborative at 5 p.m. EDT (2100 GMT).
Japan's real household spending is forecast to post its second straight year-over-year drop in June, down 1.0 percent, as consumers remain frugal amid elevated costs, but the decline is seen slowing from an unexpected 1.8 percent slump in May after April's slight 0.5 percent gain, which was the first rise in 14 months. A late start to the rainy season in many regions and hot weather boosted demand for air conditioners, beverages and summer clothing. On the month, real average expenditures by households with two or more people are expected to mark a second consecutive rise, up 0.3 percent on a seasonally adjusted basis, after dipping 0.3 percent.
Definition
Market Focus details key factors in the coming day that will impact the economic outlook and the financial markets. These include central bank events, economic indicators, policymaker speeches as well as expected political and corporate developments.
Description
Keeping up-to-date with event schedules and the economic calendar is key to understanding the global financial system. Econoday's Market Focus allows investors and policymakers to carefully track what will be making news and moving the financial markets in the coming day.
