The focus for the week ahead will be on US housing data, the ECB rates decision, and the first look at global manufacturing and services growth for July.
Central bank activity will focus on the ECB rates decision and the release of the minutes from the latest RBA and BoJ meetings. The RBA July minutes will outline the decision to start tapering bond purchases – this decision may be reconsidered as the current lockdowns in Australia have been extended. Officials from the US Fed will be in the blackout period ahead of the FOMC meeting next week on 27-28 July.
Last week, US annual CPI growth accelerated more than expected to 5.4% in Jun from 5% in May. Used car prices contributed the most to the acceleration, but shelter/owners’ equivalent rent, new cars, food, and energy service price growth also contributed to the acceleration. Slower annual growth in energy prices (gasoline) was the largest offsetting category.
The Uni of Michigan consumer sentiment survey recorded a more notable decline in US consumer sentiment in the first two weeks of July. Consumers are concerned about inflation:
Inflation has put added pressure on living standards, especially on lower and middle income households, and caused postponement of large discretionary purchases, especially among upper income households. Consumers’ complaints about rising prices on homes, vehicles, and household durables has reached an all-time record. Purchase rates, however, have benefitted from record increases in accumulated savings and reserve funds. A critical issue is whether consumers will find greater value in keeping a significant portion of their savings as a precautionary hedge, or spending a significant portion in an effort to avoid their inflationary erosion and to benefit from buying-in-advance of increasing market prices. http://www.sca.isr.umich.edu/
The key releases in the week ahead:
The US housing data for Jun, including building permits (expecting 1.7m SAAR), housing starts (expecting 1.597m SAAR), and existing home sales (expecting 5.9m SAAR). Last week, US mortgage applications rose a notable +16% (on the prior week) as rates started to ease. Both refi’s and purchase applications increased.
The prelim manufacturing and services PMI’s across key economies for July will be released later in the week.
This week, the US Treasury will settle $245bn in ST Bill auctions, paying down an estimated $48bn for the week (issuance < amount maturing). The US Treasury will also auction the 20yr Bond (settle 2 Aug) and 10yr TIPS (settle 30 Jul) this week. Approx. $19bn in ST Bills will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
