In the absence of major central bank announcements, the monthly US employment report and non-farm payrolls tops the list of economic data releases this week.
Several of the reports published during the week are updates, or revisions, to flash estimates announced earlier in the month, but there’s enough original data to make it interesting.
And set in the context of what we learned at Jackson Hole, the data could be indicative of the central bank policy meetings to come later in September.
US non-farm payrolls
Last month’s data for July surprised on the upside, with 209,000 new jobs created in the US, with the biggest gains coming in food and beverage services, professional and business services and healthcare.
Survey evidence leading up to the last labour market report, such as ISM purchasing manager data, suggested employment had cooled so investors will be wary of downward revisions to the July figure.
The average number of monthly jobs created this year is running at 184,000 and that is just about where the consensus lies for job creation in Friday’s report on August’s labour market.
Annual average hourly earnings growth is expected to remain near July’s level of 2.5%, while the unemployment rate is seen holding at a 16-year low of 4.3%.
US inflation – Fed style
Personal consumption expenditure (PCE) is the Federal Reserve’s preferred measure of inflation and has traditionally undershot consumer prices (CPI), and still does.
That can come as a relief when you’re dealing with above target inflation, but stubbornly low inflation causes certain policy dilemmas – particularly when interrupting a cycle of rate increases.
With signs that economic growth is beginning to slow a little, the low rate of inflation means the Fed is under less pressure to maintain its current cycle of rate hikes. It wouldn’t want to risk stifling growth with unnecessary rate increases.
However, the Fed could soon find itself behind the curve if it doesn’t persist with its policy schedule and inflation were to suddenly pick up.
With the dollar sitting 9.5% down on the year on a trade-weighted basis, import costs are high and inflationary pressures must be building somewhere in the supply chain.
“The Fed will want to get ahead of this inflationary pressure and a more hawkish sentiment will likely become apparent over the next few months,” says Freya Beamish at Pantheon Macroeconomics.
Headline CPI reached an annual 1.8% in June, while headline PCE stood at just 1.4% in the same month. Analysts believe that PCE will edge up to an annual rate of 1.5% in July.
UK Nationwide house prices
There’s little data of note in the first half of the week from the UK as economists return from Monday’s public holiday.
Housing market data and lending statistics published on Wednesday are the first set of major data releases and homeowners and property investors will be watching the Nationwide House Price index with a keen eye.
The UK property market is losing some steam. China’s clampdown on overseas property investment could have some future impact, but for now the declines are small.
In July, Nationwide reported annual house price growth of 2.9%, down from 3.1% in the previous month.
There is some support from a dwindling supply of homes on the market, the report added, but squeezed household budgets are likely to keep housing market activity subdued.
Halifax’s similar survey for July reported annual growth of 2.1%, down from June’s 2.6%, while the Rightmove survey for August put growth at 3.1%, up from July’s 2.8%.
Analysts expect Nationwide’s August survey to show annual price growth of about 2.8%.
Meanwhile, mortgage approvals are also falling. Seen as a leading indicator to house price growth, monthly approvals slipped to 64,684 in June, from 65,109 in the previous month.
Analysts expect July’s level to have dipped further, to around 64,000.
US manufacturing survey – ISM
Supply managers in the US manufacturing sector give their appraisal of business activity growth during August on Friday.
The Institute for Supply Management’s (ISM) July report showed the ISM index – the US version of European PMI indexes – eased to 56.3 from 57.8 in the prior month.
While this continues to signify strong growth – a number above 50 indicates expanding business activity – the rate of growth is easing as the pace of orders, employment and production slows.
Analysts forecast the August ISM index to dip further to 56.2.
US growth revision
A slight upward revision to annual US gross domestic product is expected on Wednesday, when the Bureau of Economic Analysis presents its updated figures on second quarter growth.
Previously, the flash estimate calculated annual growth in second quarter at 2.6%, but analysts believe with more information available on demand and government spending, that it will be revised up to 2.7%.
Best of the rest
The Bank of England publishes data on net lending and consumer credit on Wednesday, while on Friday, the IHS Markit manufacturing PMI is expected to tick lower again in August after rising for the first time in three months in July.
On Thursday, the eurozone unemployment rate for July is expected to fall from its current level of 9.1% as surveys and hard data in recent weeks have indicated rising robustness in the bloc’s economy.
Eurozone inflation data are also published on Thursday and the consumer price index is expected to tick a little higher from July’s headline annual rate of 1.3%.
The earnings calendar slows further this week and in the US, Barnes and Noble report quarterly results on Wednesday and Campbell’s Soup on Thursday.
In the UK, Bunzl reports on Tuesday, Petrofac on Wednesday and on Thursday are quarterlies from Hays, Ladbrokes Coral Group and the Restaurant Group.