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The following is an extract from S&P Global Market
Intelligence's latest Week Ahead Economic Preview. For the full
report, please click on the 'Download Full Report' link.
A busy week sees the US Federal Open Market Committee (FOMC)
meeting with markets predicting at least a 75-basis point hike. A
plethora of US economic data will also be released including second
quarter GDP, which could well show the US to already be in
recession. Eurozone GDP data are also updated and are likely to
show growth losing momentum ahead of a likely downturn in the third
quarter.
The Fed's FOMC meeting is set to dominate headlines this week
with a 100-basis point hike on the table (though our Fed-watchers
expect a 75bp rise). Inflation approaching double-digits has
prompted the US central bank to take a tougher stance. However, the
US could already be in a technical recession. Q2 GDP data, released
Thursday, are expected to show a modest gain but our nowcast model
points to a 1.8% contraction, on the back of a 1.6% decline in Q1.
The Fed meeting also comes hard on the heels of flash PMIs, which
pointed to heightened downturn risks for the US and Europe, with
economic activity contracting in the US and eurozone in July. While
the survey price gauges remained elevated, price pressures also
showed signs of easing, which could lead to less aggressive policy
trajectory.
Meanwhile, the US housing market has entered uncertain waters,
with mortgage rates surging amid rate hikes and increased
uncertainty. The US house Price Index - released Tuesday - will be
another marker for the diary.
In Europe, sentiment data for the Eurozone are accompanied by
GDP data for Q2. This follows the ECB rate hike of 50 basis points
- the first increase in more than a decade. Like the FOMC, the ECB
has been late in tackling surging inflation and risks tightening
policy into a downturn. The latest GDP data will therefore help
reveal the extent to which growth has been impacted by the energy
shock, material scarcities, COVID-19, price pressures and the
Ukraine war. We expect growth to have slowed, with flash PMIs
pointing to a renewed downturn in the third quarter.
Finally, in the APAC region, Hong Kong SAR's central bank policy
meeting and South Korean GDP are notable events. Retail sales,
unemployment and consumer confidence data will reveal also how
Japan has fared at the end of Q2.
Industrial price pressures ease
While July's flash PMI data brought disappointing news on
economic growth trajectories. The surveys signalled heightened
recession risks in the US and Europe as output across four largest
developed economies (the 'G4') fell for the first time since the
pandemic lockdowns of early-2020. However, the surveys brought
better news on inflation. In particular, supplier delivery times -
which measure the time is takes suppliers to provide inputs to
factories - showed the lowest incidence of delays in the developed
world since November 2020. While this alleviation of supply chain
pressure unfortunately stems primarily from a drop in demand for
inputs by factories, many of which are now starting to grow
concerned over high inventory levels, the flip side is the good
news on how price pressures have eased. With demand falling and
supply improving, pricing power is shifting away from the seller to
the buyer. Industrial input prices consequently rose across the G4
in July at the slowest rate for 15 months.
Final PMI survey data, due out in early August, will clarify the
global demand and supply picture further, and in particular reveal
how businesses (and exporters) in mainland China are coping with
ongoing COVID-19 containment measures. It will also be important to
watch the service sector price gauges, as these tend to be more
heavily influences by wages. Encouragingly, flash PMI data also
hinted at cooling in service sector cost growth.
Taiwan Industrial Production (Jun, Retail Sales (Jun)
Hong Kong Balance of Trade (Jun)
Brazil Current Account (Apr)
US Chicago Fed National Activity Index (Jun), Dallas Fed
Manufacturing Index (Jul)
Japan BOJ monetary minutes (Jul)
Tuesday 26 July
South Korea GDP Growth Rate (Q2)
Ireland Consumer Confidence (Jul)
Singapore Industrial production (Jun)
United States House Price Index (May), Consumer confidence
(Jul)
South Korea Consumer Confidence (Jul)
Wednesday 27 Jul
Australia Inflation Rate (Q2)
China Industrial profits (Jun)
Taiwan Consumer Confidence (Jul)
Japan Coincident Index Final (May)
Germany GfK Consumer Confidence (Aug)
France Consumer confidence (Jul)
Italy Business Confidence (Jul)
United States Durable goods (Jun), Interest Rate Decision
Russia Unemployment rate (Jun), GDP (Jun)
South Korea GDP (Q2)
Thursday 28 Jul
Japan Foreign Bond Investment (Jul)
Australia Retail Sales (Jun)
Hong Kong Interest Rate Decision
Netherland's Business Confidence (Jul)
Eurozone Consumer Confidence (Jul)
Germany Inflation (Jul)
United States GDP (Q2), jobless claims (Jul), Core PCE prices
(Q2)
Friday 29 Jul
South Korea industrial production (Jun)
Japan Unemployment (Jun), Retail Sales (Jun), Consumer
Confidence (Jul)
Singapore Unemployment rate (Q2), Business Confidence (Q2)
Thailand Industrial Production (Jun)
France GDP (Q2) Inflation (Jul)
Spain GDP (Q2), Inflation (Jul), Current account (Jul)
Germany Unemployment (Jul), GDP flash (Q2)
Italy GDP (Q2), Inflation (Jul), PPI (Jun)
United Kingdom Mortgage approvals (Jun)
Eurozone GDP (Q2), Inflation (Jul)
Canada GDP (May)
United States Core PCE Price Index (Jun), Michigan Consumer
Sentiment (Jul)
What to watch
Americas: US Fed FOMC, Q2 GDP data, sentiment and
housing data, Canada GDP
The US takes centre stage with the Fed FOMC meeting on Wednesday
and GDP data on Thursday. A 75, or even 100, basis point hike is
widely anticipated from the FOMC meeting, with another 50- or
75-point rise expected in September after inflation hit its highest
for over 40 years (9.1%). However, the Fed tightening is causing
concerns amid signs of weakening economic growth, with flash PMI
data pointing to a steeping economic downturn. GDP data for Q2 will
meanwhile reveal whether the US has already entered a technical
recession after the first quarter's 1.6% contraction. Our nowcast
model points to a 1.8% annualised rate of decline in Q2 against the
consensus of a modest rise. Any further weakening of the economic
growth picture alongside the elevated inflation readings will
inevitably fuel stagflation fears but could lead to a reassessment
of how aggressive the Fed's tightening is likely to be.
The week also sees a number of updates on the US housing market,
over which concerns are growing in relation to rising mortgage
rates.
Europe: Eurozone GDP, Germany Inflation, GDP and Ifo
Business Climate. France and Italy Q2 GDP data.
GDP readings for Germany are out on Friday. The latest flash PMI
data pointed to a downturn in economic in July after a weakening
growth picture in the second quarter. We forecast GDP to expand by
around 0.5% in Q2, but all eyes are focused on the dataflow to
assess downturn risks in Q3.
France and Italy Q2 GDP figures will be also scrutinised on
Friday, especially in Italy following Mario Draghi's resignation as
prime minister. Also watch out for updated business and consumer
sentiment data from the EU, with recent data showing households to
be the gloomiest on record.
For the UK, the focus will be on mortgage lending.
Asia-Pacific: South Korea Q2 GDP, Hong Kong Interest
rate decision, Japan and Australia Retail sales
South Korea will also report Q2 GDP readings in the coming week.
Like many regions, growth is expected to ease while consumer prices
continue to rise sharply. There is also a wealth of data on the
Japanese economy to be released, including CPI, retail sales and
industrial production, which come on the heels of flash PMI data
signalled a renewed weakening of the economic picture as the
rebound from Omicron fades.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
