In the usual post-payrolls economic data lull, the focus this week will be on North America, with Chair Yellen's semi-annual testimony on Wednesday alongside the the BoC, as well as a Friday data deluge in the US including CPI & retail sales. A 25bp hike this week from the Bank of Canada is expected, although the central bank may choose to wait until October. Additionally, there are monetary policy meetings in Korea, Malaysia, Chile, Peru & Israel.
All eyes on the US: Fed Chair Yellen delivers her semi-annual testimony to Congress this week. According to DB, it will be fascinating to see whether Mrs Yellen chooses this week's semi-annual testimony to Congress on Wednesday and the Senate on Thursday to reinforce the recent more hawkish global central bank speak or whether she tries to pull things back a little. DB expect her to reinforce the message from the June 14 post-FOMC press conference and continue to guide the market towards an announcement of the beginning of balance sheet normalisation at the September 20 meeting as well as a rate hike by year-end, potentially resulting in futher bond selling. BofA will be looking at how Chair Yellen describes her concern about financial stability risks, at how she talks about progress towards the dual mandate and for any details about balance sheet policy. She will also likely be asked questions about fiscal policy and financial market regulation, Our US Economic Weekly describes our expectations in more detail.
US inflation data will also draw attention, as will retail sales, both released on Friday. Many expect another soft core CPI print of 0.1% m/m in June.
Canada: Time to hike: The Bank of Canada will also be a key event this week. The recent avalanche of hawkish messages from the BoC, as well as from central bankers of advanced economies around the world, indicate that a hike is highly likely. A hike this week is our baseline, though the bank may also choose to wait until October. We have raised our CAD profile, but remain a little skeptical given valuation and recent moves in oil.
The week ahead in Emerging Markets: There are monetary policy meetings in Korea, Malaysia, Chile, Peru and Israel. We expect BCRP to cut the reference rate 25bp. We also have several China macro releases.
A snapshot look at the global week ahead
- Key Events: – Monday: Chinese Inflation Data, all in line with expectations (Jun)
- Wednesday: Fed Chair Yellen testifies to the US House Financial Services Committee, Bank of Canada Monetary Policy Decision, UK Labour Market Data (May/Jun)
- Thursday: Chinese Trade Balance (Jun)
- Friday: US CPI (Jun), US Retail Sales (Jun)
DB with a more detailed look at the week ahead:
- We’re kicking off the week today in Germany where first out the gate we’ll get the latest trade data. Following that this morning we are due to receive the latest Bank of France business sentiment reading and Sentix investor confidence reading for the Euro area. It’s a typically quiet post-payrolls day for data in the US with the June labour market conditions index and May consumer credit reading the only data due.
- Tuesday looks equally quiet with no releases of note in Europe and just the NFIB small business optimism, JOLTS job openings and wholesale inventories data due in the US.
- Turning to Wednesday, the early data is due out of Japan where PPI will be released. In the UK we are due to receive the May and June employment data while Euro area industrial production for May will also be released. In the US the Fed’s Beige Book release is all that is due.
- On Thursday we’re kicking off in China with the June trade data. In Europe the final June CPI reports in Germany and France will be due. The BoE will also release its latest credit conditions and bank liabilities survey. In the US on Thursday we’ll get June PPI, initial jobless claims and the June monthly budget statement.
- We end the week in Asia on Friday with May industrial production data. In Europe we’ll get the May trade balance for the Euro area before we finish the week in the US with June CPI, retail sales, industrial production, manufacturing, July University of Michigan consumer sentiment and May business inventories.
A focus on North America courtesy of RanSquawk
North America: The major US economic releases will come on Friday. Headline CPI data for June is expected to moderate to 1.7% Y/Y from 1.9%, while the core metric is expected to tick up to 1.8% Y/Y from 1.7%. Commerzbank believe that “the Fed has a problem. Oil and food prices often mask the underlying inflation trend, the Fed watches the core rates, which are adjusted for these volatile components. Since the end of the recession in mid-2009, the core rate of the private consumption expenditure deflator rarely rose above 2%. Even core consumer price inflation, which usually comes in somewhat higher, was below target for most of the time. In recent months, however, even the slight uptrend came to a standstill, led by a price war by cellular phone providers.” Commerz suggest that “against this backdrop, it does not come as a surprise that the Federal Reserve is no longer referring to inflation to justify the normalisation of its monetary stance, but to the labour market and – recently – above all to the risks that a sustained expansionary course would have on financial market stability.” US Retail Sales data also hits on Friday. The headline is expected to rise by 0.1% M/M, following last month’s 0.3% fall, while the ex-autos measure is expected to rise by 0.2% M/M following last month’s 0.3% fall. May’s release represented the weakest outcome for retail sales since January 2016, as gasoline and auto sales both subtracted from total sales growth in the month, but even core sales were weak. Westpac believe that “the weak underlying trend is not expected to reverse in the near future. Rather, growth is set to persist at or near current levels.”
After the minutes from the latest FOMC meeting held no surprises, focus will fall on Fedspeak, with particular onus on any language surrounding balance sheet reduction. The focal point will be the questions following Fed Chair Yellen’s appearance before the US House Financial Services Committee, after the text release held no notable headlines. On the voter front we will hear from Brainard, Kaplan and Evans during the week, while non-voters George and Williams will also make public addresses.
The focal point in the Canadian docket comes on Wednesday, as the Bank of Canada issues its latest monetary policy decision and quarterly Monetary Policy Report
The majority of analysts are looking for the for the BoC to stand pat, and leave its key rate unchanged at 0.5%, although the swaps market prices in a circa 87% chance of a 25bps hike. Rhetoric from BoC governor Poloz and Senior Deputy Governor Wilkins has swung to the hawkish side in recent weeks. Wilkins was the first to shift her stance, noting that the “the Bank will assess whether all of the considerable policy stimulus presently in place is still required.” Poloz followed this up by suggesting “the rate cuts in the wake of the drop in oil prices in mid-2014 had largely done their job,” while he has backed this up with further hawkish rhetoric in subsequent speeches. On the domestic data front GDP growth has averaged 3.5% per quarter over the past three quarters, with Poloz noting that he expects inflation to be “well into an uptrend” as the output gap closes in the first half of 2018. The domestic labour market experienced its best quarter since 2010 during Q2 it is also worth noting that BoC’s Summer 2017 Business Outlook Survey (BOS) showed that businesses were very confident about future sales growth, employment, and investment. In particular, a record 66% of firms plan to increase employment over the next 12 months. Scotiabank now expects the Bank of Canada “to start raising interest rates in the second half of this year (two increases in 2017) and to raise interest rates once more in 2018.”
It is also worth noting that US earnings season gets underway with the likes of JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), PepsiCo (PEP) and Delta Airlines (DAL) all reporting their quarterly results.
Other releases of note during the week: Tuesday US Wholesale Inventories (May) Thursday US PPI (Jun) Friday US Industrial & Manufacturing Production (Jun) US University Of Michigan Sentiment (Jul, P)
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Finally, here is Goldman with a detailed breakdown of what to expect in the US, alongside consensus expectations:
The key economic releases this week are the CPI and retail sales reports on Friday. In addition, there are several scheduled speaking engagements by Fed officials this week, including Fed Chair Yellen’s Semiannual Monetary Policy Report to Congress on Wednesday and Thursday.
Monday, July 10
- 03:00 PM Consumer credit, May (consensus +$13.5bn, last +$8.2bn)
- 11:00 PM San Francisco Fed President Williams (FOMC non-voter) speaks: San Francisco Fed President Williams will give a speech titled "Speed Limits and Stall Speeds: Fostering Sustainable Growth in the United States" in Sydney, New South Wales. Audience Q&A is expected.
Tuesday, July 11
- 06:00 AM NFIB small business optimism, June (consensus 104.4, last 104.5)
- 10:00 AM JOLTS job openings, May (last 6,044k)
- 10:00 AM Wholesale inventories, May final (consensus +0.3%, last +0.3%)
- 12:30 PM Fed Governor Brainard (FOMC voter) speaks: Federal Reserve Governor Lael Brainard will give the keynote address at a conference jointly sponsored by Columbia University’s School of International and Public Affairs and the Federal Reserve Bank of New York. The topic of the conference is “Normalizing Central Banks’ Balance Sheets: What is the New Normal?” Audience Q&A is expected.
- 01:20 PM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a moderated Q&A discussion at the Minnesota Women's Economic Roundtable event. Audience Q&A is expected.
Wednesday, July 12
- 08:30 AM Fed Chair Yellen’s opening statement for testimony released: Federal Reserve Chair Yellen’s prepared opening statement for her Semiannual Monetary Policy Report to Congress will be released ahead of her appearance before the House Financial Services Committee later in the morning.
- 10:00 AM Fed Chair Yellen appears before the House Financial Services Committee: Federal Reserve Chair Janet Yellen will appear before the House Financial Services Committee to deliver the Fed’s semi-annual Monetary Policy Report to Congress and answer questions from lawmakers. We expect her testimony to be in line with the June FOMC statement and the post-meeting press conference.
- 02:00 PM Beige Book, July FOMC meeting period: The Fed’s Beige book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The June Beige Book noted that while activity continued to expand across most districts, a couple reported a slowdown in the pace of growth. Labor markets continued to tighten, while consumer spending softened. In the July Beige Book, we look for additional anecdotes related to the state of consumption, price inflation, and wage growth.
- 02:15 PM Kansas City Fed President George (FOMC non-voter) speaks: Kansas City Fed President Esther George will give a speech on the US economic outlook and the Federal Reserve’s balance sheet in Denver, Colorado. Audience Q&A is expected.
Thursday, July 13
- 08:30 AM PPI final demand, June (GS flat, consensus flat, last flat); PPI ex-food and energy, June (GS +0.1%, consensus +0.2%, last +0.3%); PPI ex-food, energy, and trade, June (GS +0.2%, consensus +0.2%, last -0.1%): We expect PPI was flat for a second month in June, reflecting a modest rise in core producer prices offsetting a decline in energy prices. We estimate PPI ex-food and energy rose 0.1% and a somewhat firmer 0.2% increase after additionally excluding trade services.
- 08:30 AM Initial jobless claims, week ended July 15 (GS 255k, consensus 245k, last 248k); Continuing jobless claims, week ended July 8 (consensus 1,950k, last 1,956k): We estimate initial jobless claims rose 7k to 255k in the week ended July 15. Initial claims can be particularly volatile around this time of year due to annual summer auto-plan shutdowns, and we expect closures concentrated around the July Fourth holiday to produce a rise in claims this week. Continuing claims – the number of persons receiving benefits through standard programs – have started to rise, increasing in each of the last five weeks following a sharp decline in the first four months of the year.
- 10:00 AM Fed Chair Yellen appears before the Senate Banking Committee: Federal Reserve Chair Janet Yellen will appear before the Senate Banking Committee in the second day of testimony to deliver the Fed’s semi-annual Monetary Policy Report to Congress and answer questions from lawmakers.
- 11:30 AM Chicago Fed President Evans (FOMC voter) speaks: Chicago Fed President Charles Evans will give the keynote speech at the 9th Annual Rocky Mountain Economic Summit in Victor, Idaho. President Evans will discuss current US economic conditions and monetary policy. Audience and media Q&A is expected.
- 01:00 PM Fed Governor Brainard (FOMC voter) speaks: Federal Reserve Governor Lael Brainard will give a speech on monetary policy at the National Bureau of Economic Research’s Summer Institute in Cambridge, Massachusetts. Her remarks will be very similar to the speech given on July 11 at the conference hosted by Columbia University and the New York Fed. Audience Q&A is expected.
- 02:00 PM Monthly budget statement, June (consensus -$20.0bn, last -$88.4bn)
Friday, July 14
- 08:30 AM CPI (mom), June (GS +0.03%, consensus +0.1%, last -0.1%); Core CPI (mom), June (GS +0.12%, consensus +0.2%, last +0.1%); CPI (yoy), June (GS +1.7%, consensus +1.7%, last +1.9%); Core CPI (yoy), June (GS +1.7%, consensus +1.7%, last +1.7%): We expect a 0.12% increase in June core CPI, which would leave the year-over-year rate unchanged at +1.7%. While we expect sequential improvement in the monthly pace of core inflation following three consecutive readings below 0.10%, several negative factors suggest scope for a somewhat soft report, including weakness in used car prices and airfares, as well as additional disinflation from cell phone plan discounts. On the positive side, we expect a rebound in apparel prices following three consecutive monthly declines. We estimate a 0.03% rise in headline CPI, reflecting rising food prices but a second monthly decline in energy prices. This would be consistent with the year-over-year rate slowing by two-tenths to 1.7%.
- 08:30 AM Retail sales, June (GS flat, consensus +0.1%, last -0.3%); Retail sales ex-auto, June (GS +0.2%, consensus +0.2%, last -0.3%); Retail sales ex-auto & gas, June (GS +0.4%, consensus +0.4%, last flat); Core retail sales, June (GS +0.4%, consensus +0.3%, last flat): We estimate core retail sales (ex-autos, gasoline, and building materials) rose 0.4% in June, reflecting firmer same-store sales results. We also estimate a 0.4% increase in the ex-auto ex-gas component. However, we estimate a 0.2% rise in the ex-auto component due to a second sharp monthly drop in gas prices. We expect the headline measure to be unchanged, reflecting a modest decline in auto sales.
- 09:15 AM Industrial production, June (GS +0.4%, consensus +0.3%, last flat); Manufacturing production, June (GS +0.4%, consensus +0.3%, last -0.4%); Capacity utilization, June (GS +76.9%, consensus +76.8%, last +76.6%): We estimate industrial production increased 0.4% in June, reflecting solid growth in auto and mining production. We estimate manufacturing production also rose 0.4%, reflecting broad cyclical improvement in several components, particularly in auto output.
- 09:30 AM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will take part in a moderated Q&A session at the Center for Economic Studies of the Private Sector’s conference on the Federal Reserve and monetary policy in Mexico City. Audience and media Q&A is expected.
- 10:00 AM Business inventories, May (consensus +0.3%, last -0.2%)
- 10:00 AM University of Michigan consumer sentiment, July preliminary (GS 94.4, consensus 95.0, last 95.1): We estimate the University of Michigan consumer sentiment index fell 0.7pt to 94.4 in the July preliminary reading, on top of the two point decline from its recent peak in May. Our forecast reflects continued a further pullback in higher frequency consumer surveys and choppy stock market performance over the last two weeks. Gas prices declined further over the last month, suggesting scope for a negative impact on the report’s measure of 5- to 10-year ahead inflation expectations, which at 2.5% in June was in the middle of its recent range.
Source: DB, BofA, GS, RanSquawk