On Tuesday,
the BoJ Core CPI y/y data is expected in Japan, providing insights into the
nation’s core inflation dynamics. Meanwhile, in the United States, attention
will be on the release of Existing Home Sales data and the Richmond
Manufacturing Index.
Moving to
Wednesday, New Zealand is set to unveil figures for Retail Sales q/q, including
Core Retail Sales q/q data. Additionally, it’s a day for Flash Manufacturing
PMIs and Flash Services PMIs, with data being released for Australia, the
eurozone, the United Kingdom, and the United States, offering key insights into
the health of manufacturing and service sectors. In the U.S., New Home Sales
data will be disclosed, providing a view on the real estate market.
On
Thursday, the focus shifts back to the United States with the release of
Unemployment Claims figures and Durable Goods Orders m/m data. It’s also
noteworthy that this day marks the beginning of the Jackson Hole Symposium, a
significant economic event.
On Friday,
the week will conclude with the U.S. Revised University of Michigan (UoM)
Consumer Sentiment and the Revised UoM Inflation Expectations data. It’s also
the second day of the Jackson Hole Symposium, with highly anticipated speeches
by Federal Reserve Chair Powell and ECB President Lagarde.
Japan’s Tokyo CPI is expected to experience a slight decrease, moving from the
previous 3.0% to 2.9%. Analysts suggest that if inflation remains in the 3.0%
range, there’s a possibility that the BoJ might consider making minor
adjustments to its monetary policy.
According
to ING analysts, the recent weakness of the JPY is driven by the yield gap
which didn’t account for the recent economic recovery and elevated inflation.
As such, the move doesn’t align with the BoJ’s position that FX reflects
fundamentals of the economy. As a reminder, the GDP data for Japan printed way
above expectations.
Shifting
focus to the United States, there’s a consensus among experts that Existing
Home Sales figures will experience a slight dip, moving from 4.61 million to 4.15
million. Existing home owners are reluctant to sell their properties and move
into new ones as they would have to pay much higher mortgage rates than their
current ones. The resulting supply scarcity pushes existing home prices up and
also puts pressure on potential buyers who are faced with higher prices as well
as elevated financing costs leading to a slowdown in buying activity.
Analysts at
Westpac anticipate that New Zealand’s retail sales will likely show a modest
decrease of -0.1% (previously -1.4%). Nominal spending might register a very
limited gain, suggesting consumer purchasing power has been adversely affected
by high interest rates and an inflation rate above target.
In the eurozone, there are expectations that the Manufacturing PMI may decline
from 42.7 to 42.4, and the Services PMI is also anticipated to drop from 50.9
to 50.4. The eurozone’s economic performance has been challenged since the
beginning of the year, but since July, there has been a noticeable
deterioration in the data, and this trend is expected to persist into the
current month. Both the manufacturing and services sectors are experiencing
contractions, although services are still holding on to expansionary territory.
Overall, consumer activity has decelerated over the past few months.
Turning to
the United Kingdom, the consensus regarding PMI figures suggests a decline in
both the manufacturing and services sectors as well. The manufacturing sector
is likely in full recession, and while the services sector has managed to
remain in expansionary territory due to lower commodity prices, activity in
this sector is also expected to soften. In the UK, elevated inflation remains a
significant challenge, putting pressure on consumer spending and raising
concerns about the economic outlook.
The new home sales market in the U.S. has experienced a generally positive
trend over the past six months being up 23.8% y/y. Forecasts suggest that the
new home sales data this week is expected to continue this trend, with an
increase projected from 697K to 708K. Despite high mortgage rates, builders
have several options to incentivize home buyers, such as price cuts and rate
buydowns. Moreover, the high prices and low supply in the existing homes market
have pushed many buyers to opt for new constructions.
The
consensus for the U.S. unemployment claims is for a rise from 239K to 241K and
core durable goods orders m/m are expected to drop from 0.5% to 0.2%. It’s
anticipated that durable goods orders in general will see a drop of -4.1% after
4 consecutive months of growth and a +4.6% jump in June. The rise last month
was likely due to a surge in non-defense aircraft and parts orders, which is
normally a temporary occurrence.
The main
event for this week will be Chair Powell’s speech at the Jackson Hole
symposium. The theme for this year is “Structural Shifts in the Global
Economy.” The schedule is not yet available, but the event could include
discussions about growth, inflation and consumption patterns.
This article was written by Gina Constantin.