Key Events This Week: Central Bankers In Sintra, European CPI, US PCE And ISM
Without having a blockbuster event to look forward to this week, and with the July 4th holiday next week meaning many traders will be on vacation and liquidity will be even more challenging, DB’s Jim Reid notes that there are plenty of things to keep us occupied in what are highly uncertain times. Perhaps the ECB’s Forum on Central Banking in Sintra will be the key event to watch, with a policy panel on Wednesday which will bring together Chair Powell, President Lagarde and Governor Bailey together the likely highlight.
Staying in Europe, all eyes will be on the June CPI numbers released for Germany (Wednesday), France (Thursday) and Italy and the Eurozone on Friday. Consensus expectations don’t suggest we’re yet at peak headline inflation with CPI expected to pick up a few tenths YoY this week. With commodity prices fading sharply in June the hope is that we will be near the top soon. In fact, DB’s US economists put out an inflationary chart book last week that suggested that the peak will be in September (9.1% headline and 6.3% core).
The problem is that even if headline dips because of energy, core won’t necessarily fall as quickly with wages and second round effects in full force. We had a small indicator of that last week as DB’s economists also pointed out that the recent acceleration in US hospital workers’ wage growth from around 2.5% to almost 5% should serve to add an additional 50bps to core PCE inflation next year. On Thursday, we’ll get the latest reading of the US core PCE deflator within the personal income and spending data. Core PCE is the Fed’s preferred inflation measure so this and the healthcare news is important.
Staying with US data, we have a fair amount to look forward to with the all important ISM on Friday (53.2 expected vs 56.1 last month). We’ll also see the Chicago PMI on Thursday and regional Fed’s manufacturing indices throughout the week. Durable goods orders (today) and wholesale and retail inventories (tomorrow) will be key to assessing inventory pressures flagged by several firms in recent weeks as well as corporate behaviour amid some easing in supply-chain backlogs.
How the consumer is faring under rising rates and stubborn inflation will be another key theme, with the Conference Board’s June consumer confidence index out tomorrow (99.9 expected vs 106.4 last month). Elsewhere, China’s industrial data and PMIs (Thursday), as well as key economic indicators from Japan, will be in focus.
Finally, even though we are at the very back end of Q2 earnings, this week will see some bellwether consumer spending companies such as Nike (Monday), H&M and General Mills (Wednesday) report. Other corporates releasing results will include Prosus (Monday), Micron and Walgreens Boots Alliance (Thursday).
Courtesy of DB, here is a day-by-day calendar of events:
Monday June 27
- Data: US May durable goods orders, capital goods orders, pending home sales, June Dallas Fed manufacturing index, China May industrial profits
- Central banks: ECB’s Forum on Central Banking (through June 29), BoJ summary of opinions, ECB’s Lagarde, Villeroy speak
- Earnings: Nike, Prosus
Tuesday June 28
- Data: US June Conference Board consumer confidence index, Richmond Fed manufacturing index, May advanced goods trade balance, wholesale inventories, retail inventories, April FHFA House Price index, Germany July GfK Consumer Confidence index, France June consumer confidence, Italy April industrial sales
- Central banks: Fed’s Daly speaks, ECB’s Lagarde, Lane, Elderson, Panetta speak, BoE’s Cunliffe speaks
Wednesday June 29
- Data: Japan June consumer confidence, May retail sales, Germany June CPI, Eurozone June economic, industrial confidence, May M3
- Central banks: Fed’s Powell, Mester and Bullard speak, ECB’s Lagarde, Guindos, Schnabel speak, BoE’s Bailey speaks
- Earnings: H&M, General Mills, Bed Bath & Beyond
Thursday June 30
- Data: US June MNI Chicago PMI, May personal income, personal spending, PCE deflator, initial jobless claims, China June PMIs, Japan May industrial production, housing starts, France June CPI, May PPI, consumer spending, Germany June unemployment change, May retail sales, import price index, Italy, Eurozone May unemployment rate, Italy May PPI, UK June Nationwide House Price, Canada April GDP
- Earnings: Walgreens Boots Alliance, Micron
Friday July 1
- Data: US June ISM index, vehicle sales, May construction spending, China June Caixin PMI, Japan June Tokyo CPI, vehicles sales, May jobless rate, Q2 Tankan manufacturing indices, Eurozone June CPI, France May budget balance, Italy June PMI, CPI, new car registrations, budget balance, UK May consumer credit,mortgage approvals, M4
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Focusing on just the US, Goldman writes that the key economic data releases this week are the durable goods report on Monday, the core PCE report on Thursday, and the ISM manufacturing report on Friday. There are several speaking engagements from Fed officials this week, including a panel discussion with Chair Powell hosted by the ECB on Wednesday.
Monday, June 27
- 08:30 AM Durable goods orders, May preliminary (GS +0.4%, Bloomberg consensus +0.2%, last +0.5%); Durable goods orders ex-transportation, May preliminary (GS +0.5%, consensus +0.3%, last +0.4%); Core capital goods orders, May preliminary (GS +0.4%, consensus +0.1%, last +0.4%); Core capital goods shipments, May preliminary (GS +0.4%, consensus +0.2%, last +0.8%): We estimate that durable goods orders rose 0.4% in the preliminary May report, following a 0.5% increase in April. Our forecast assumes flattish commercial aircraft orders but a continued rise in new orders of core capex equipment, reflecting higher prices and a possible rebound in East Asian demand.
- 10:00 AM Pending home sales, May (GS -3.0%, consensus -3.9%, last -3.9%): We estimate that pending home sales declined 3.0% in May, following a 3.9% decline in April.
- 10:30 AM Dallas Fed manufacturing index, June (consensus -6.5, last -7.3)
Tuesday, June 28
- 08:30 AM Advance goods trade balance, May (GS -$104.0bn, consensus -$105.4bn, last -$106.7bn): We estimate that the goods trade deficit decreased by $2.7 to $104.0bn in May compared to the final April report, mostly reflecting an increase in exports.
- 08:30 AM Wholesale inventories, May preliminary (consensus +2.2%, last +2.2%)
- 09:00 AM FHFA house price index, April (consensus +1.6%, last +1.5%)
- 09:00 AM S&P/Case-Shiller 20-city home price index, April (GS +2.0%, consensus +1.85%, last +2.42%): We estimate that the S&P/Case-Shiller 20-city home price index rose by 2.0% in April, following a 2.42% (21.17% yoy) increase in March.
- 10:00 AM Conference Board consumer confidence, June (GS 101.0, consensus 100.0, last 106.4): We estimate that the Conference Board consumer confidence index decreased by 5.4pt to 101.0 in June, reflecting negative signals from other confidence measures.
- 10:00 AM Richmond Fed manufacturing index, June (consensus -5, last -9)
- 12:30 PM San Francisco Fed President Daly (FOMC non-voter) speaks: San Francisco Fed President Mary Daly will be interviewed as part of a LinkedIn event. On June 24th, President Daly noted that “how much additional tightening will be required depends on a number of factors that fall outside of the Fed’s direct control, including the speed and magnitude of supply chain recovery, the duration of the war in Ukraine, and the willingness of individuals who have left the labor force to reenter,” and indicated that she expects “the costs of adjustment to be moderate, with some slowing of GDP growth below its longer-run trend and an increase in the unemployment rate from the very low levels we see today.”
Wednesday, June 29
- 08:30 AM GDP (third), Q1 (GS -1.5%, consensus -1.5%, last -1.5%); Personal consumption, Q1 (GS +3.1%, consensus +3.1%, last +3.1%); We estimate no revision on net in the third vintage of the Q1 GDP report (previously reported at -1.5% qoq ar):
- 09:00 AM Fed Chair Powell (FOMC voter) speaks: Fed Chair Jerome Powell will take part in an economic policy panel discussion during the European Central Bank’s annual policy forum in Sintra, Portugal. Moderated Q&A is expected. In congressional testimony last week, Chair Powell reiterated that the Fed will make “continued expeditious progress toward higher rates,” and noted that “financial conditions have already priced in additional rate increases, but we need to go ahead and have them.” Chair Powell also emphasized that while the FOMC is “not trying to provoke and do not think we will need to provoke a recession,” it remained “absolutely essential” for the Fed to restore price stability, and noted that it would be “very challenging” for the Fed to achieve a soft landing.
- 11:30 AM Cleveland Fed President Mester (FOMC voter) speaks: Cleveland Fed President Loretta Mester will take part in a panel discussion during the European Central Bank’s annual policy forum. Text and audience Q&A are expected. On June 19th, President Mester noted that “recession risks are going up partly because monetary policy could have pivoted a little bit earlier than it did,” and reiterated that the Fed will be looking for the “month-to-month changes in inflation rates to get some really good evidence on whether we’ve seen inflation first stabilize and then begin to move back down.”
- 01:05 PM St. Louis Fed President Bullard (FOMC voter) speaks: St. Louis Fed President James Bullard will deliver pre-recorded introductory remarks at a Fed community development research seminar. On June 20th, President Bullard argued that the Fed should “act forthrightly and aggressively to get inflation turned around and get it under control,” warning that “if we don’t do that, you could suffer a decade of high and variable inflation.” President Bullard also noted that he was optimistic on growth, arguing that “it is a little early to have this debate about recession probabilities in the US,” and indicating that he expects only “a moderate slowing in the economy” as the Fed tightens financial conditions.
Thursday, June 30
- 08:30 AM Initial jobless claims, week ended June 25 (GS 230k, consensus 230k, last 229k); Continuing jobless claims, week ended June 18 (consensus 1,310k, last 1,315k):We estimate initial jobless claims increased to 230k in the week ended June 25.
- 08:30 AM Personal income, May (GS +0.4%, consensus +0.5%, last +0.4%); Personal spending, May (GS +0.3%, consensus +0.4%, last +0.9%); PCE price index, May (GS +0.62%, consensus +0.7%, last +0.25%); PCE price index (yoy), May (GS +6.36%, consensus +6.4%, last +6.27%); Core PCE price index, May (GS +0.39%, consensus +0.4%, last +0.34%); Core PCE price index (yoy), May (GS +4.72%, consensus +4.8%, last +4.91%): Based on details in the PPI, CPI, and import prices reports, we estimate that the core PCE price index rose by 0.39% month-over-month in May, corresponding to a 4.72% increase from a year earlier. Additionally, we expect that the headline PCE price index increased by 0.62% in May, corresponding to a +6.36% increase from a year earlier. We expect that personal income increased by 0.4% and personal spending increased by 0.3% in May.
- 09:45 AM Chicago PMI, June (GS 56.3, consensus 58.0, last 60.3): We estimate that the Chicago PMI declined 4pt to 56.3 in June, reflecting a decline in other business surveys. In particular, our manufacturing orders tracker fell 3 points to 52.4, a two-year low.
Friday, July 1
- 10:00 AM Construction spending, May (GS flat, consensus +0.4%, last +0.2%): We estimate construction spending remained flat in May.
- 10:00 AM ISM manufacturing index, June (GS 54.4, consensus 54.7, last 56.1): We estimate that the ISM manufacturing index declined by 1.7pt to 54.4 in June. Business surveys generally declined in the month, and the ISM measure remains elevated relative to our survey tracker, which fell 0.9pt to 53.0. We also expect a second monthly decline in the supplier deliveries component, reflecting easing covid restrictions in China.
- 05:00 PM Lightweight motor vehicle sales, June (GS 13.0mn, consensus 13.4mn, last 12.7mn)
Source: DB, Goldman, BofA
Mon, 06/27/2022 – 09:39