The focus for the week ahead will be on US retail sales and central bank messaging.
This week, minutes from the latest FOMC and RBA meetings will be released. The FOMC minutes will be further scrutinized for any hints of a shift in the message – especially with the Jackson Hole symposium coming up the following weekend (26-28 Aug). US Fed Chair Powell will host a town hall-style meeting this week. The Reserve Bank of NZ will meet on rates, and it is widely expected to increase the benchmark rate to 0.50%.
Despite an improving labour market situation, there was an alarming fall in US consumer sentiment in early Aug. Headline sentiment in early Aug is now lower than at the onset of the pandemic-led shutdowns back in Apr 2020. Sentiment for both current and expected conditions also fell sharply. Such declines in the past have been associated with a sudden negative shift in the economy. The reason for the decline in early Aug has been traced back to the resurgence in Covid (Delta) infections in the US:
There is little doubt that the pandemic’s resurgence due to the Delta variant has been met with a mixture of reason and emotion. Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end. http://www.sca.isr.umich.edu/
In this context, data for US consumer spending will be backward-looking this week. Retail sales for Jul are expected to fall by -0.2% (Jun +0.6%). US housing market data will cover building permits (expecting 1.615m SAAR) and housing starts (expecting 1.608m for Jul). US industrial production for Jul is expected to increase by +0.5%. The Empire State and Philadelphia Fed manufacturing surveys will provide the first look at Aug manufacturing activity.
Aus data of note this week will be the labour and employment market survey for Jul. Employment is expected to contract by -45k in Jul (after +29k in Jun). The RBA minutes this week will reflect the meeting when there was a limited shutdown in the largest Aus state. The RBA expected the shutdowns to reduce hours worked but have a limited impact on employment. Since that meeting, both of the most populous states have been placed into even more severe, and extended shutdowns to reduce the rising number of Delta infections.
This week, the US Treasury will settle $400bn in ST Bills, Notes, and Bonds, raising approx. $78.4bn in new money. Approx. $75bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be rolled over. The US Treasury will auction the 20yr Bond and 30yr TIPS this week – to settle on 31 Aug.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf or scroll through the file below.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
