Key Events In The Coming Busy Week: Yellen, Inflation, Durables And GDP

It's set to be a busy week with a a jam-packed agenda for central bank watchers, with speeches due from Janet Yellen, Mario Draghi, Mark Carney, Haruhiko Kuroda and more. Economic data may also drive momentum in financial markets, with closely watched reports due on inflation, employment, manufacturing and housing from China to the U.S. We also have GDP, durable goods and consumer confidence in US, industrial production in Japan and confidence indexes in EA

Key highlights:

  • In the US, it will be a busy week with durable & capital goods orders, pending home sales, core PCE inflation, personal income & spending and multiple Fed speakers on the agenda.
  • In the Eurozone, key releases include money supply M3, CPI and confidence data. There will also be a central banking forum with ECB, BoJ, BoE and BoC speakers in the schedule.
  • In UK, we wait for final GDP, credit & lending data, house prices and money supply M4.
  • In Japan, main releases include retail sales, CPI and industrial production.
  • In Canada, beyond GDP, we will hear from BoC speakers.
  • In China, we will have current account balance and PMIs.

The focus is on inflation releases in US (PCE), EZ and Japan. The attention on these releases should remain high given recent market action: declining oil and inflation was cited as one of the main reasons that supported the recent downward move in long-end rates.

A breakdown of key events just in the US:

A summary of all the key DM events in the coming week is below:

In the US, Bank of America is looking for a flat reading for core PCE inflation, causing % yoy inflation to decline to 1.4% (1.411% unrounded) from 1.5% in April. In the Eurozone, the bank expects inflation to drop to 1.2% (1.15%) marking its inflation forecasts to market following the drop in oil prices: it now expects inflation at 1.5% in 2017 and 1.0% in 2018. In Japan, BofA forecast Nationwide inflation at 0.5% y/y in May. However, we think the June Tokyo CPI is key: we expect a +0.3% rise in June.

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DB's Jim Reid breaks down the week's events on a day by day basis.

  • This morning in Europe we’re kicking off in Germany where the June IFO survey is due out. In the US the most significant release is the May durable and capital goods orders reports, while the Dallas Fed manufacturing survey will also be released later this afternoon.
  • Tuesday kicks off in China with industrial profits data. In the UK we’ll then get the CBI retailing sales data before we then get the conference board consumer confidence, Richmond Fed manufacturing index and S&P/Case-Shiller house prices readings in the US.
  • Turning to Wednesday, the early data in Europe includes France consumer confidence and Euro area M3 money supply. Over in the US on Wednesday we are due to get the advance goods trade balance for May, wholesale inventories for May and pending home sales for May.
  • Thursday kicks off early in Japan with the latest retail trade report. In Europe we’ll then get consumer confidence in Germany, UK money and credit aggregates and confidence indicators for the Euro area. The afternoon will then see Germany release its flash June CPI print while in the US we’ll receive the third and final Q1 GDP report revisions and initial jobless claims data.
  • We end the week on Friday with Japan employment data and CPI along with the China PMIs for June. It’s a busy end to the week in Europe too on Friday with CPI in France, unemployment in Germany, Q1 GDP in the UK (final revision) and a first look at Euro area CPI in June. A busy day concludes in the US with personal income and spending in May, core and deflator PCE readings, Chicago PMI and the final University of Michigan consumer sentiment reading for June.

Away from the data the Fedspeak this week consists of Fed Chair Yellen tomorrow evening along with Williams, Harker and Kashkari also at various stages tomorrow, and Williams again on Wednesday and Bullard on Thursday. China Premier Li Keqiang speaks early tomorrow morning. Meanwhile the ECB forum which kicks off today will see Carney, Draghi and Kuroda all speak on Wednesday. Other things to note this week is the UK PM May’s speech this afternoon,

US Supreme Court decision on Trump’s travel ban today, BoE stability report on Tuesday, the result of the second part of the Fed’s bank stress tests on Wednesday and UK House of Commons vote on Thursday.

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Finally, courtesy of RanSquawk, here is a preview of the main events in the US, where the key economic releases this week are the durable goods report on Monday, the Q1 GDP revision on Thursday, and the personal income and spending report on Friday. In addition, there are several scheduled speaking engagements by Fed officials this week, including a speech by Fed Chair Yellen on Tuesday.


Forecast: -0.7% vs prev. -0.8%; ex-transport seen 0.3% vs prev. -0.5%. The headline weakness is likely to come on the back of softer orders from Boeing, which reported 13 orders in May, down from the 15 in April (note: this reading captures the pre-Paris air show data). Excluding transport, the picture should be more stable, and there is some risk of prior revisions upwards, Credit Agricole says: “Durable goods production excluding vehicles was reported to have decreased 0.6%, but we think that April’s unexpected decline was overdone and should put upward pressure on orders this month.”


Forecast: 116 vs prev. 117.9. Lower confidence is likely to be driven by declines in the expectations index, which are forecast to fall by around 2 points to 100.6, analysts believe. “The usual drivers of confidence have all remained supportive in recent weeks,” says Capital Economics, “labour market conditions are still strong, gasoline prices have been trending lower and the stock market is at a record high.” But the consultancy wants that “the timelier Gallup and University of Michigan measures of confidence have both dropped back recently. And based on the past relationship, the Conference Board index also looks set for a fall.”

THU 29 JUN 2017 – 1330BST: US GDP (Q1, 3RD RELEASE)

Forecast: 1.2% Q/Q annualised, unchanged vs 2nd release; consumption expected to be revised up to 0.9% from 0.6%; price index seen unchanged vs 2nd release at 2.2%. No major changes are expected to the headline, though the composition of growth will be in focus, particularly the price index.


Forecast: personal income 0.3% M/M vs prev 0.4%; spending 0.1% M/M vs prev. 0.4%. Core PCE 1.4% Y/Y vs prev. 1.5%. The Fed recently downgraded its view of PCE inflation in 2017 to 1.6%m and the core measure to 1.7%. The May data is likely to highlight the challenges the Fed faces as it normalises policy, with the PCE data once again moving away from target. Meanwhile, May’s employment report saw wages grow by 0.2% M/M, and “this should feed through to broad personal income growth of 0.3%,” ERBS says. “Spending growth is poised to come in lighter than income on the back of relatively soft retail sales on the month,” and the bank notes “that the retail number came with substantial back-month revisions, and accordingly, even with a flat read for May, real personal consumption is poised to clock in 3%+ for the quarter overall.”

FRI 30 JUN 2017 – 1330BST: CANADA GDP (APR)

Forecast: exp. 0.20% M/M vs prev. 0.50%. Following a strong March print, where utilities and manufacturing supported output, though utilities output is likely to come in flat in April, RBC’s analysts say. The bank also expects a 5% M/M drop in non-conventional oil extraction after fire-related shutdowns which may impact the headline. Meanwhile, RBC says solid retail and wholesale sales data should be supportive. “Taking a step back, the BoC’s hawkish shift is supported by an average of 3.5% annualized growth the last three quarters, with a strong April outcome incrementally adding to this trend,” RBS says.


The Prelim release came in at 94.5, down from 97.1, missing expectations, and printing the softest reading since October 2016, with weakness evenly spread between the current conditions and future expectations index. “All optimism generated by Trump’s Presidential victory has been reversed now, which presumably relates to the lack of action on fiscal stimulus, tax reform and healthcare changes,” said analysts at ING. “There was also a steep fall in business expectations for next year (again back to Trump election levels) and also business conditions over the last few months.” ING adds that weak wage growth was likely to have exacerbated the situation. “Nonetheless,” the bank says “most other spending related questions saw similar responses seen in recent months (be it buying a house, car or other items).” It is worth noting that the prelim data showed 1-year inflation expectations unchanged at 2.6%, but 5-year expectations rose by 0.2ppts to 2.6%.

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Weekly G-10 central bank monitor

  • The abundance of Fedspeak last week did little to persuade the market to shift towards the FOMC’s hiking trajectory – which has pencilled in seven additional 25bps hikes through the end of 2019; Fed Funds Futures, on the other hand, see just two more hikes over that horizon.
  • An acceptance of the need to be patient was generally evident in the tone of the 2017 voters who spoke about monetary policy last week: while NY Fed’s William Dudley suggested that halting the tightening cycle might imperil the economy, Chicago Fed’s Charles Evans thought it prudent to ‘wait and see’, a sentiment echoed by the Dallas Fed’s Robert Kaplan as well as the usually hawkish Philadelphia Fed President Patrick Harker.
  • Evans and Kaplan’s concerns stem from inflation (specifically, the apparent lack of it). Kaplan was sanguine, and believes that inflationary pressures will pick-up as labour market slack is eroded – which was also Dudley’s core argument. Evans, however, was more scathing, arguing that low inflation was a serious policy mess, and he expressed nervousness about the recent soft inflation data and the challenges about bringing up towards the Fed’s 2% target.
  • There is a growing rift among Fed policymakers,” write analysts at Jefferies. The bank notes that following the June FOMC rate decision “there have been public grumblings from a growing number of Fed officials who are becoming uncomfortable with the behaviour of the recent inflation data,” adding “predictably, policymakers with dovish inclinations have been outspoken. Yellen is finding herself in a new role as a hawk.” May’s PCE data, released this coming Friday, will be key for influencing the debate. The core measure is seen ticking down by 0.1ppt to 1.4%, and crucially, away from the FOMC end-2017 forecast of 1.7%.
  • Morgan Stanley’s analysts point out that since the beginning of the year, US inflation expectations have fallen by the most in the G10 economies, with 10-year breakeven rates down by around 40bps, which subsequently pushed the 2s10s spread to the narrowest since end of 2007. And this curve-flattening – also evident in other curve spreads – has not gone unnoticed by Fed officials. Kaplan suggested that the Fed be cautious about hiking rates further with 10-year yields around these levels, arguing that it was indicative of the market’s sluggish view on future growth. Dudley was having none of it, however, attributing it to low overseas inflation, once again, highlighting the divergence of opinion among 2017 voters.
  • Balance sheet normalisation, however, is one area where the Fed seems more unified in their endeavours to kick-start the process in 2017. The St Louis Fed President James Bullard said the Fed could announce the start in September, and even identified the ‘low $2 trillion’ level as an appropriate for the long-term size of the balance sheet (from the current $4.5 trillion mark, and for reference, versus around $900 million in Q3 2008). But once again, the link to inflation may prove the guiding factor: Kaplan said balance sheet reduction may have a ‘muting’ effect on inflation, and he was uncertain as to exactly how much. Expect more commentary around this theme in the weeks ahead.

Source: Bofa, DB, Goldman and RanSquawk