- Eurozone PPI data to flag inflation risks
- Bank of England MPC meeting could highlight division amongst members
- Latest US employment and salary data set for release, may take pressure off policy hawks
Tuesday
Tuesday sees the release of the latest Eurozone Producer Price Index data for June, which could cause fresh concern for policymakers. This is expected to remain stubbornly high and whilst the print might not reach the May level of 9.6%, forecasts suggest it might only be a little way short. As we’ve noted before the knock on effect of this is either through higher prices being passed down to consumers, or reduced margins impacting corporate profitability.
Also on Tuesday, US Factory Order data for June is set to be published. This now appears close to having normalised, which may be offering some cause for concern on the basis that the lost demand from just over a year ago hasn’t really been recovered. After printing 1.7% in May, a reading of around half that figure is expected, although the one saving factor here is likely to be that this again takes some heat out of the US economy, reinforcing last week’s slower than forecast GDP growth.
Wednesday
Eurozone Retail Sales for June are out on Wednesday morning and this has the potential to heap another layer of concern on the ECB as a sharp deceleration is being forecast here. The month-on-month figure which printed at 4.6% in May is expected to collapse to just 0.8%. There may be some solace in the fact that this is a lagging indicator whilst both the vaccine roll out and broader reopening of economies continues apace, but the pace of change here could still lead to questions about how sustainable the recovery is into the second half of the year.
The US ADP Payroll survey for July is out on Wednesday too, acting as the traditional curtain-raiser for Friday’s main event in the shape of the non-farm payrolls. We’re seeing repeated signs that the US economy is easing back a little, something which helps dampen inflation fears and in turn removes a little of the pressure when it comes to hawkish calls to hike interest rates. A number around 500,000 is expected, which would be the lowest since February, but as we’ve seen before these prints do have a habit of throwing out some surprises.
Thursday
Thursday sees the Bank of England convene for its Monetary Policy Committee statement and although there’s no immediate change expected here, we do have the ongoing debate as to just how long inflationary pressures will persist for. There are indications that some dissent may be emerging amongst committee members and that the time is nearing for a shift away from the ultra-lax monetary policy that has dominated of late. Not only will this risk boosting the strength of Sterling but it consequently has the ability to knock valuations of those companies repatriating significant foreign currency profits.
Friday
Rounding out the week, we have the usual run of US employment stats, this time for July. Headline Non-Farm Payrolls are forecast to come in strong, around the 900,00 mark, but as noted with the corresponding ADP print there’s a real risk of a notable miss here. More significantly look for a small decline in the Unemployment Rate from June’s 5.9%, whilst average hourly earnings may also be cause for concern with an annualised rate of 3.6% against inflation which is some way below the current rate of inflation – something that again could reign in the pace of economic recovery in the latter part of the year.
