On the global event front, in the week ahead, China retail sales and IP data will be important. In addition, the Indonesia MPC will meet on Thursday. In the intermeeting period, Bank Indonesia hiked policy rates by 50bps to defend its currency and we expect them to announce another 25bp hike this round. That would be 150bps in hikes since June and we will be watching to see how determined they sound to prevent further FX weakness. In Japan, the higher Q2 GDP revision (even if missing expectations) will be an important factor in the decision whether or not to go ahead with the VAT hike. The data will likely be spun as strong enough to support the tax increase as planned. In Europe, watch to see if industrial production registers a yoy increase for the second consecutive month. UK labour statistics will also be key since the BoE adopted a 7% unemployment threshold last month.
In the US, retail sales on Friday will be the main data release. In addition, Congress will return from its 5-week recess on Monday and will likely keep their focus on Syria this week. Finally, San Francisco Fed President Williams (who does not vote on FOMC policy this year) will speak on Monday. Last week, Williams argued that the FOMC should maintain its focus on the unemployment rate, despite its limitations. After Friday's employment report saw the unemployment rate drop again due to falling participation, this issue is likely to resurface. The Fed's communication blackout period begins on Tuesday so Williams will be the last FOMC speaker before the September meeting ends on the 18th.
The Week Ahead
Monday, September 9
- Australia Housing Finance (Jul): Consensus +2.0%, Previous +2.7%.
- Japan GDP Q2, Final 3.8%: Consensus 3.9%, Preliminary 2.6%.
- China CPI (Aug): Consensus +2.6% yoy, Previous +2.7%.
- China WPI (Aug): Consensus -1.7% yoy, Previous -2.3%.
- US Consumer Credit (Jul): Consensus +$12.3bn, Previous +$13.8bn.
- Also interesting: Fed’s Williams speaks.
Tuesday, September 10
- Australia Nab Business Survey (Aug): Previous: Business conditions -7pts, Confidence -3pts.
- China Retail Sales (Aug): Consensus +13.2%, Previous +13.2%.
- China IP (Aug): Consensus +9.9%, Previous +9.7%.
- India Trade Balance (Aug): Previous –US$12.3bn.
- Turkey GDP (Q2): Consensus +4.1%, Previous +3.0%.
- South Africa Current Account Balance (Q2): Consensus –ZAR196bn, Previous –ZAR191bn.
- France IP (Jul): Consensus +0.5% mom, Previous -1.4%.
- Sweden IP (Jul): Consensus +0.5% mom, Previous +3.0%.
- Italy GDP (Q2, Final): Consensus -0.2% qoq, Preliminary -0.2%.
- US Small Business Optimism (Aug): Consensus 95.0, Previous 94.1.
- Also interesting: US JOLTS job openings.
Wednesday, September 11
- Australia Consumer Sentiment (Sep): Previous 105.7.
- Hungary CPI (Aug): Consensus +1.6% yoy, Previous +1.8%.
- Czech Republic Current Account Balance (Jul): Consensus –CZK7.0bn, Previous –CZK3.2bn.
- Poland Current Account Balance (Jul): Consensus +EUR73mn, Previous +EUR574mn.
- Germany HCPI (Aug, Final): Flash 1.6% yoy.
- UK Unemployment (Aug): Consensus -21k, Previous -29.2k.
- UK ILO Unemployment Rate (Aug): Consensus 7.8%, Previous 7.8%.
- US Wholesale Inventories (Jul): Consensus +0.3% mom, Previous -0.2%.
Thursday, September 12
- Australia Employment (Aug): Consensus +10k, Previous -10.2k.
- Australia Unemployment Rate (Aug): Consensus 5.7%, Previous 5.8%.
- Australia Participation Rate (Aug): Consensus 65.2%, Previous 65.1%.
- Korea MPC: Consensus expect the policy rate to remain at 2.5%
- Philippines MPC: Consensus expect the policy rate to be unchanged at 3.5%.
- Japan Core Private Machinery Orders (Jul): Consensus +2.2%, Previous -2.7%.
- Turkey Current Account Balance (Jul): Consensus -$5.4bn, Previous -$4.5bn.
- Israel Current Account Balance (Q2): Previous +1.8bn.
- France HCPI (Aug): Consensus +1.0% yoy, Previous +1.2%.
- Spain HCPI (Aug, Final): Consensus 1.6% yoy. Flash 1.6%.
- Sweden Unemployment Rate (Aug): Consensus 7.9%, Previous 7.8%.
- Italy IP (Jul): Consensus +0.3% mom, Previous +0.3%.
- Euro Area IP (Jul): Consensus -0.3% mom, Previous +0.7%.
- US Import Price Index (Aug): Consensus +0.5% mom, Previous +0.2%.
- Also interesting: Mark Carney presents inflation report to Treasury Select Committee. US jobless claims.
Friday, September 13
- Russia MPC: Consensus expect the policy rate to remain at 5.5%. We continue to expect rates to remain on hold through the end of the year on the basis of a relatively stable inflation outlook. Consensus expects 50bps in cuts through the end of the year.
- Poland CPI (Aug): Consensus expect 1.1% yoy, Previous 1.1%.
- Sweden GDP (Q2, Final): Consensus -0.1% qoq, Preliminary -0.1%.
- US PPI (Aug): Consensus +0.2%, Previous +0.0%.
- US Core PPI (Aug): Consensus +0.1% mom, Previous +0.1%.
- US Retail Sales (Aug): Consensus +0.4% mom, Previous +0.2%.
- US Core Retail Sales (Aug): Consensus +0.3% mom, Previous +0.5%.
- US Consumer Sentiment (Sep): Consensus 82.0, Previous 82.1.
- US Business Inventories (Jul): Consensus +0.3% mom, Previous +0.0%.
In table format from SocGen:
Top issues for the week ahead:
UK DATA TO UNDERMINE CARNEY
UK data this week, including the August RICS house price balance, August claimant count and July construction, is set to paint a picture of recovery becoming increasingly broad based.
MARKET ISSUES: The better data are set to leave that market increasingly sceptical that Mr Carney will be able to stick to his forward guidance. Good news for Sterling!
US CONSUMER STRENGTH
July consumer credit is expected to see a slower pace with a gain of $11.1bn, down from $13.8bn in June. If our forecasts are correct, this nonetheless means a year-todate gains in consumer credit of $91bn compared to $79.6bn for the same period last year. The key report this week, however, will be the August retail sales. We look for a gain of 0.5% mom for retail sales ex-autos.
MARKET ISSUES: In our opinion, data between now and 17-18 September is unlikely to steer the Fed away from tapering at the upcoming meeting.
GOOD ACTIVITY FOR CHINA IN AUGUST
As detail by lead China economist, Wei Yao in this edition of the Week Ahead, the August trade data painted a fairly mixed picture. This is the first of a truckload of Chinese data out this week. We expect August new loans to pick up to CNY740bn, but total credit is the more important variable, also capturing the shadow banking system and this is now slowing. Overall, we expect the August activity data (industrial production, retail sales and fixed asset investments) to point to a further improvement in August.
MARKET ISSUES: Looking ahead, our central scenario continues to look for a structural slowdown of the Chinese economy. Those expecting to see a durable return to 8%+ growth rates will in our opinion be disappointed.
WILL GERMANY BE TOUGHER AFTER THE ELECTION?
Just two weeks left to the German election and opinion polls have narrowed. An important question for the markets is just how tough a new German government will be on Europe. Will Spain and France be forced to catch up on what appears to be some fiscal slippage? Will Italy be pushed to reform? The consensus is that Chancellor Merkel will show some flexibility, but will nonetheless want to see progress on both austerity and reform. Tougher questions still are whether Greece and Portugal will receive further financial assistance. No surprise; the majority of Germans are opposed to lending more to the European periphery. Our expectation is that compromise will ultimately be reached, but will come with the usual conditionality. The deeper point around the German elections that we also have taken away from recent conversations with experts is the Germany will be politically more volatile over the next four year term as it seems increasingly unlikely that a strong majority will emerge from the German election. Wolfgang Munchau in the FT also makes this point. When it comes to European issues, the risk is that there will be little resolve to advance further on banking and fiscal union and little appetite for new loans. This would be very bad news for the European process.
MARKET ISSUES: A less politically stable Germany is not a scenario that we believe is currently discounted by the markets. Risks of such an outcome are growing and all else being equal we see this as bad news for the future growth prospects of both the euro area and Germany. As highlighted in our recent European Themes, Germany urgently needs reform!
Source: Goldman and SocGen