More cackling this week from the henny-pennies about the health of the US economy, with the focus shifting to the consumer price inflation report for July.
But there will also be other big decisions: a probable rate cut in New Zealand on Wednesday, wages data for Australia and the July jobs report, as well as average weekly earnings, the final monthly drop of economic data from China, and an estimate of Japanese June quarter economic growth.
Economists are expecting the US July CPI data (Wednesday) to show a 0.2% rise from June, which would bring annual inflation down to an annual 2.9% (year-over-year). Core inflation of 0.2% month-over-month is also expected, bringing its annual rate down to an annual 3.2% year-over-year from 3.3%.
The henny-pennies are obsessing that if the inflation data shows signs of dropping too steeply, then fears will rise that the Federal Reserve has sent the economy into a slide by leaving interest rates high for too long and contributing to market turbulence—as did the easy money trades of investors large and small.
Of course, if there is no slide in inflation, or it edges higher (considered unlikely), then the hennies will fret that a "Rate Cut in September is off." For now, US futures markets are pricing in a 55% chance the central bank will bring down benchmark interest rates by 0.50% in September, at its next policy meeting, compared with a roughly 5% chance seen a month ago.
That’s silly because the central bank will not cut rates by an emergency level when the economy is performing well. I know it did in the pandemic, but that was a genuine emergency—now is just a series of hissy fits and dummy spits from hennies who have had their sugar bowl money supply made more expensive or choked off.
US retail sales figures will also be out this week and will give us a good look at how the core part of household consumption is going—an easing is forecast. Industrial production data will show Boeing’s woes having an impact, and there are manufacturing figures for the northeast US and housing starts, as well as the weekly unemployment benefits figures on Thursday.
America’s June quarter earnings season is almost at an end, and the results from four retailers—giants Walmart and Home Depot, and smaller groups Dillards, a department store chain, and discounter Ross Stores—will give us another view of the way households are shopping and consuming.
In Australia, June quarter wages growth in tomorrow’s Wage Price Index is forecast to come in around 0.8% quarter on quarter, for an annual rate of 3.9%, down from 4.1% in the March quarter. The Westpac consumer survey for August is likely to show continuing weak consumer confidence, and the July NAB survey is likely to show a further slowing in business conditions (both also due tomorrow). July jobs data is expected to show a 15,000 gain in employment with unemployment unchanged at 4.1%.
The Australian June half profit reporting season will start to ramp up with 32 major companies reporting.
The Reserve Bank of New Zealand is likely to cut its policy rate to 5.25% on Wednesday, from 5.50%. The AMP’s Shane Oliver says the market has a 74% probability of a cut.
In Asia, China’s economic activity data for July (to be released on Thursday) is expected to show more subdued conditions with a slight improvement in industrial production and retail sales, unchanged growth in investment, and more weak property-related indicators. And Thursday also sees the release of the latest Japanese June quarter GDP data, which is expected to bounce back to a 0.6% growth rate from a 0.7% contraction in the March quarter, with growth seen in both consumer and business spending.
