This Week's Key Events: CPI, PPI, and Fed Speakers
The current week is situated between the US payrolls from the previous Friday and the US CPI this coming Thursday, which is the week's highlight. Jim Reid from DB reminded us this morning that the first of these was an exceptional report. The headline number was up +254k against expectations of +150k, and the unemployment rate fell a tenth to 4.1% (4.05% unrounded). This was due to a record surge in 785,000 government jobs. Despite the monthly payrolls report being known as a "random number generator", it was an impressive report that went against recent fears, causing the dollar and yields to soar. The main impact was a +21.6bps increase in 2yr US yields on Friday and the probability of a 50bps cut next month declining from around 33% to effectively zero in the process. Reid's view was that the amount of rate cuts priced in since mid to late summer was only likely if there was a recession. If there wasn't, then the rates market overall was too pessimistic, a view he still holds today.
This week is relatively quiet in the US apart from Thursday's CPI. However, there are several global day-by-day highlights. Today sees Germany factory orders and Eurozone retail sales, tomorrow will have German Industrial Production, and Swedish CPI, Wednesday will see the last FOMC minutes and a 10yr UST auction, Thursday will see the release of the account of the last ECB meeting, France present its budget proposal, Japanese PPI, German retail sales, Italian industrial production, Norway and Denmark CPI, and a 30yr UST auction, with Friday being home to US PPI, the US University of Michigan survey, UK August monthly GDP and US Earnings season kicking off with JPMorgan, Wells Fargo, BlackRock, Bank of New York Mellon all reporting.
This week's US CPI consensus expects headline CPI of +0.1% vs. +0.19% previously, to come in tame with core +0.2% (down from +0.28%) edging lower but more elevated than headline. Headline YoY CPI would dip a couple of tenths to 2.3%, with core staying around the same level at 3.2%. However, the six-month annualized core rate would fall from 2.7% to 2.4%. Rents will again take center stage after recent strength. As for PPI on Friday, DB and consensus expect headline (+0.1% vs. +0.2% last month) and core (+0.2% vs. 0.3% last month) to be directionally similar to CPI. The market will as ever pay closest attention to the categories that feed into the core PCE deflator – namely, health care services, airfares and portfolio management. Staying with inflation, Friday's preliminary University of Michigan consumer sentiment survey will have inflation expectations which last month picked up a tenth to 3.1% for the long-run measure but fell the same amount to 2.7% for the 1yr measure.
It's also a busy week of Fed speakers. It will be interesting to see how they all react to the bumper payrolls print. The last FOMC meeting minutes on Wednesday will be a bit stale but may give us a better understanding as to how policy might evolve under various scenarios.
Friday will mark the start of the Q3 earnings season with several US banks releasing results. Samsung, PepsiCo, and BlackRock also report throughout the week.
DB strategists expect S&P 500 earnings growth to slow from 11.8% in Q2 to 9% in Q3, driven by a narrow group of sectors such as energy and mega cap growth & tech, with growth for the others staying steady in the mid-single digits.
Bottom Line
The key economic data release this week is the CPI report on Thursday. There are many speaking engagements from Fed officials this week, including remarks by Vice Chair Philip Jefferson on Tuesday and Wednesday and by New York Fed President John Williams on Thursday. What are your thoughts on this? Share this article with your friends and sign up for the Daily Briefing, which is everyday at 6 pm.
This Week's Key Events: CPI, PPI, and Fed Speakers
The current week is situated between the US payrolls from the previous Friday and the US CPI this coming Thursday, which is the week's highlight. Jim Reid from DB reminded us this morning that the first of these was an exceptional report. The headline number was up +254k against expectations of +150k, and the unemployment rate fell a tenth to 4.1% (4.05% unrounded). This was due to a record surge in 785,000 government jobs. Despite the monthly payrolls report being known as a "random number generator", it was an impressive report that went against recent fears, causing the dollar and yields to soar. The main impact was a +21.6bps increase in 2yr US yields on Friday and the probability of a 50bps cut next month declining from around 33% to effectively zero in the process. Reid's view was that the amount of rate cuts priced in since mid to late summer was only likely if there was a recession. If there wasn't, then the rates market overall was too pessimistic, a view he still holds today.
This week is relatively quiet in the US apart from Thursday's CPI. However, there are several global day-by-day highlights. Today sees Germany factory orders and Eurozone retail sales, tomorrow will have German Industrial Production, and Swedish CPI, Wednesday will see the last FOMC minutes and a 10yr UST auction, Thursday will see the release of the account of the last ECB meeting, France present its budget proposal, Japanese PPI, German retail sales, Italian industrial production, Norway and Denmark CPI, and a 30yr UST auction, with Friday being home to US PPI, the US University of Michigan survey, UK August monthly GDP and US Earnings season kicking off with JPMorgan, Wells Fargo, BlackRock, Bank of New York Mellon all reporting.
This week's US CPI consensus expects headline CPI of +0.1% vs. +0.19% previously, to come in tame with core +0.2% (down from +0.28%) edging lower but more elevated than headline. Headline YoY CPI would dip a couple of tenths to 2.3%, with core staying around the same level at 3.2%. However, the six-month annualized core rate would fall from 2.7% to 2.4%. Rents will again take center stage after recent strength. As for PPI on Friday, DB and consensus expect headline (+0.1% vs. +0.2% last month) and core (+0.2% vs. 0.3% last month) to be directionally similar to CPI. The market will as ever pay closest attention to the categories that feed into the core PCE deflator – namely, health care services, airfares and portfolio management. Staying with inflation, Friday's preliminary University of Michigan consumer sentiment survey will have inflation expectations which last month picked up a tenth to 3.1% for the long-run measure but fell the same amount to 2.7% for the 1yr measure.
It's also a busy week of Fed speakers. It will be interesting to see how they all react to the bumper payrolls print. The last FOMC meeting minutes on Wednesday will be a bit stale but may give us a better understanding as to how policy might evolve under various scenarios.
Friday will mark the start of the Q3 earnings season with several US banks releasing results. Samsung, PepsiCo, and BlackRock also report throughout the week.
DB strategists expect S&P 500 earnings growth to slow from 11.8% in Q2 to 9% in Q3, driven by a narrow group of sectors such as energy and mega cap growth & tech, with growth for the others staying steady in the mid-single digits.
Bottom Line
The key economic data release this week is the CPI report on Thursday. There are many speaking engagements from Fed officials this week, including remarks by Vice Chair Philip Jefferson on Tuesday and Wednesday and by New York Fed President John Williams on Thursday. What are your thoughts on this? Share this article with your friends and sign up for the Daily Briefing, which is everyday at 6 pm.
