Major data releases next week should help divert some of the attention away from the geopolitical risks back to the outlook for monetary policy. Second quarter GDP growth figures out of Japan will be the main item to watch, followed by retail sales releases in the UK, the US, and China. Inflation data will be out in Canada, the Eurozone and the UK, while the latest employment numbers are due in Australia and the UK.

Chinese industrial output and retail sales growth to slow in July

The economic calendar will kick off with a batch of data releases out of China on Monday. Industrial output growth was unexpectedly strong in June, sharply beating expectations. It is expected to slow however in July, from 7.6% to 7.2% year-on-year. Retail sales also rose by more than expected in June, expanding by the most in one and a half years. It is forecast to ease slightly to 10.8% in July from the prior 11.0%. Also out on Monday is the closely watched indicator of business spending. Urban investment in China is forecast to remain unchanged at 8.6% y/y between January and July.

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Australian wage and jobless data to be watched

An improving Australian labour market has contributed to the aussie’s impressive gains this year, which even after the declines seen over the past three weeks, the Australian dollar has appreciated more than 9% against its US counterpart in the year-to-date. Employment data released on Thursday should show whether the solid jobs growth since the start of the year is continuing. Also important will be wage growth figures a day earlier on Wednesday. Like in many other advanced economies, earnings growth has been very sluggish in Australia, despite falling unemployment, acting as a drag on consumer prices.

Canadian inflation remains muted

The Bank of Canada raised interest rates for the first time in seven years in July even though inflation has been on a downward path since January. The Bank has blamed the weakness on temporary factors, and given the lag time between policy action and future inflation, it decided to tighten policy as the economy is absorbing spare capacity at a faster pace than anticipated. July inflation data out on Friday (forecast at 1.2% y/y) may provide more clues as to whether another rate hike is forthcoming this year. Any prolonged weakness in inflation would be negative for the Canadian dollar, which has rallied strongly since the BoC’s hawkish turn.

Eurozone GDP and inflation eyed

It will be another relatively quiet week for the Eurozone next week, with the second estimate of GDP growth for the second quarter and the final CPI release for July unlikely to capture as much attention as the first readings. First up though is June industrial production data on Monday. Eurozone industrial output is forecast to decline by 0.5% month-on-month in June, while the annual rate is forecast to moderate from 4% to 2.8%. The second estimate of second quarter GDP is out on Wednesday. The quarterly rate is not forecast to be revised from the 0.6% figure of the preliminary reading. Final inflation numbers are also not expected to see any revision from the 1.3% and 1.2% y/y rates seen for CPI and core CPI respectively in the flash estimates.

Japan’s economy to grow for sixth straight quarter

Another country reporting GDP data next week is Japan. Growth figures out on Monday will likely show the Japanese economy expanded by 0.6% quarter-on-quarter in the three months to June, twice the rate of the first quarter and the sixth consecutive quarter of positive growth This will be followed by trade data on Wednesday. Exports are forecast to accelerate in July from 9.7% to 13.6% y/y. However, there are fears the yen’s sharp gains this week may hurt exporters. In addition, there are signs of slowing capital spending by businesses. Data on core machinery orders out this week came in below expectations, contracting for the second consecutive quarter.

US retail sales in focus

Retail sales figures out of the US on Tuesday may provide the greenback some much needed respite from its recent hammering, especially against the yen. After two straight months of declines, retail sales are expected to bounce back by rising 0.3% m/m in July. Business inventories numbers for the same month are also due the same day. Housing data will follow on Wednesday in the form of building permits and housing starts, while the Philly Fed manufacturing index is released on Thursday, along with July industrial output. On Friday, the University of Michigan’s preliminary reading of the consumer sentiment gauge should give the first indication as to how well consumer confidence is holding up in August. The index is forecast to edge up to 94.0.

UK data under spotlight amid growth fears

Economic indicators out of the UK next week will shed some more light on the strength of the British economy as evidence continues to point to a weakening picture for consumer spending. CPI data is out first on Tuesday and the annual rate is forecast to tick up to 2.7% in July, after a surprise big drop to 2.6% in June. Unemployment data will follow on Wednesday, with the jobless rate expected to stay unchanged at 4.5% in the three months to June. However, there is still no sign of wage pressures building up and average weekly earnings growth is forecast to remain steady at 1.8% during the same period. Finally, retail sales data are due on Thursday. Retail sales rose by a bigger-than-expected 0.6% in June but is expected to ease to 0.2% m/m in July. The annual rate is forecast to slow to just 1.4%.

With British consumers continuing to face a pay squeeze as real incomes drop, the Bank of England is unlikely to rush into a decision to raise interest rates, unless inflation beats the Bank’s forecast that it will peak at around 3% in October. A weaker dollar has so far helped support the pound around the $1.30 level even as expectations of a rate hike by the BoE in 2017 recede. Any downside surprises to next week’s data could add further pressure on the pound.


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