by Kim | Sep 13, 2021
The focus on the week ahead will be on US data – notably the CPI for Aug, retail sales, and consumer sentiment.
It will be a quiet week on the central bank front ahead of the FOMC meeting next week.
This week, the US CPI for Aug will be reported, and the pace of acceleration is expected to ease but growth will remain elevated. CPI growth in Aug is expected to be +5.3% (Jul prior +5.4%). US retail sales for Aug are expected to decline by -1% (-1.1% Jul) and the weaker consumer sentiment is expected to persist with a small gain from 70.3 in Aug to 72 in the first half of Sept. Also out this week will be several of the regional Fed surveys with an early view of Sept manufacturing momentum.
Data this week, together with the weaker growth in non-farm payrolls for Aug and the recent moderate downshift in growth noted in the Beige Book last week will be key inputs into the Fed decision next week.
In Aus, the RBA Governor Philip Lowe will speak this week. Last week, the RBA Board did not overturn its previous tapering decision despite the current Delta outbreak. QE purchases at the lower rate were extended through to at least Feb 2022 (rather than reviewed earlier). Restrictions remain in the two big states, albeit starting to ease, and vaccination rates are continuing to increase. The 70-80% (of 16yrs+) vaccination threshold should be reached by Oct/Nov for a broader ‘reopening’. The RBA noted that the recovery has only been “interrupted” at this stage, with the setback in growth expected to be temporary. Growth in Q4 is expected to rebound. The Aus labour market data out this week will be important, and employment is expected to decline by 70k (+2.2k in Jul). Participation is expected to contract notably, and the unemployment rate is expected to increase to 4.9% (from 4.5% in Jul).
The remainder of the Chinese data for Aug will be released this week – including industrial production, retail sales, FA investment, loans, and the house price index. Concerns remain over slowing growth in China (amid government crackdowns).
This week, the US Treasury will settle approx. $293bn in ST Bills, Notes, and Bonds this week, raising approx. $30bn in new money.
Approx. $28bn in ST Bills, Notes, and Bonds 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 pdf or scroll through the file below.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 6, 2021
The focus for the week ahead will be on central bank rate decisions. It will be a light data week – with US JOLTS for Jul and US PPI for Aug in focus.
This week, the RBA, BoC, and ECB will meet on monetary policy. The expectations are for no change to policy settings by the RBA. The Aus Q2 GDP came in stronger than expected and improving vaccination rates are providing some hope for the easing of restrictions. The ECB may indicate plans for QE tapering. The BoC is not expected to announce any change to policy at this stage despite recently disappointing data.
In the US, the federal pandemic benefits expire this week (5 Sept). These were introduced as a part of the CARES Act last year (PUA, PEUC, EB’s, FPUC, and MEUC) to support those impacted by Covid restrictions but not covered by the state unemployment benefits. Some states will still accept new PUA claims over the next few weeks while some states have already ceased extended benefits programs. As of 14 Aug, there were 5.4m people registered for PUA continuing claims, and 3.8m people for PEUC continuing claims.
Last week, US payrolls growth disappointed with a large miss of +235k new payrolls versus +728k expected. The Jul payrolls growth was revised higher to over +1m new payroll jobs. The lower growth in payrolls for Aug may be enough to postpone any taper announcements by the FOMC at the Sept meeting.
The US household labour market survey had some positive results. The decline in the number of unemployed persons was led by growth in employment rather than by a fall in participation. The participation rate remained unchanged (for 16yrs+), and the unemployment rate declined. The US ISM’s for Aug indicated a moderating pace of growth. Firms continued to experience supply chain disruptions that impacted output growth. Firms also noted some difficulty in filling positions.
The official Chinese National Bureau of Statistics PMI’s came in lower than expected (after recent regulatory crackdowns) with a notable contraction in non-manufacturing activity. The manufacturing PMI was at the 50-neutral level.
This week, the US Treasury will settle approx. $263bn in ST Bills with a net paydown of -$14bn (issuance < maturing bills).
Approx. $20bn in ST Bills will mature on the Fed balance sheet and will be rolled over.
The US Treasury will also auction $120bn in Notes and Bonds this week to settle next week.
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
by Kim | Aug 30, 2021
The focus for the week ahead will be on US non-farm payrolls for Aug and growth momentum.
It will be a surprisingly quiet week on the central bank front ahead of key meetings next week (RBA, BoC, and ECB next week). Next Monday will be the US Labour Day holiday long weekend.
There was no taper announcement at the US Federal Reserve Jackson Hole symposium last week. As telegraphed in the recent minutes, the performance of the US labour market has yet to reach the ‘substantial further progress’ benchmark. However, Fed Chair Powell noted that employment has made ‘good progress’ and if the economy evolves as anticipated, then a taper could be announced this year (three meetings left).
This means an even greater focus on US non-farm payrolls over the next months – especially headline payrolls, participation, and the U6 measure. Growth in non-farm payrolls this week for Aug is expected to be +728k (prior was +943k). The Fed is also watching for a reduction in labour market slack – in particular, the participation rate (↓61.1%) and the U6 measure of underemployment (↑9.5%). Job openings indicate that demand for workers is strong, but labour market slack remains an issue. The Fed is looking for indications that workers are returning to the labour force especially as students go back to on-site schooling.
The Fed minutes and Chair Powell’s Jackson Hole speech also highlighted the risk to growth from the latest outbreak of the virus and especially the impact on the unvaccinated population. The final consumer sentiment readings for Aug remained weak amid concerns over inflation, slowing income gains (rolling-off of benefits), and the recurrence of covid outbreaks.
The extraordinary falloff in sentiment also reflects an emotional response, from dashed hopes that the pandemic would soon end and lives could return to normal. http://www.sca.isr.umich.edu/
The US ISM manufacturing and services surveys for Aug will provide some insight into any impact on growth momentum. Last month, the manufacturing ISM indicated more consistent growth while services recorded faster expansion. Themes around short supply of inputs, long lead-times, and rising prices have continued to play out in the regional (unrelated) surveys in Aug.
The final Markit PMI’s for Aug will be released this week covering the major economies.
In Australia, the two most populous states remain in strict lockdown and NZ had also extended its lockdown (related outbreak). Aus data out this week – Q2 GDP (mostly reflecting activity prior to the lockdowns) expecting +0.5% (QoQ), building permits expecting a -5% fall for Jul, and housing finance for Jul expecting a -2% fall.
This week, the US Treasury will settle $452bn in ST Bills, Notes, Bonds, and TIPS raising approx. $110bn in new money. Approx. $48bn in ST Bills and Notes 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 pdf or scroll through the file below.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Aug 23, 2021
The focus for the week ahead will be on growth and the US Federal Reserve Jackson Hole Policy Symposium to be held on Friday 27 Aug.
The growth outlook is under question with the Delta virus gaining a foothold across several countries, including the US. This will be an important test for vaccination strategies. US growth already appeared to be moderating as some fiscal measures have started to roll off. But the concern from Dallas Fed Kaplan late last week (who has been a strong proponent of normalizing monetary policy), the FOMC minutes, and the rescheduling of the Jackson Hole symposium from in-person to online provide some cautious signals.
From the FOMC minutes, a taper announcement seemed unlikely as early as the Jackson Hole meeting this week but is still ‘live’ for this year. Discussions focused on the impact on financial conditions, the timing, and the composition of the taper. The standard for ‘significant further progress’ has not yet been met for the labour market but could be met by the end of the year. Concerns were raised over the interpretation of a taper announcement and what it means for the path of rates (the FOMC wants to keep QE taper and rates normalization independent). Risks to the outlook remain – with a slowing vaccination rate and the question of the impact on growth from Delta infections.
In NZ, the RBNZ held off on its anticipated rate increase last week as level 4 restrictions were imposed across the country. The RBNZ Board noted that it will likely return to its normalization stance.
The Committee agreed that their least regrets policy stance is to further reduce the level of monetary stimulus so as to anchor inflation expectations and continue to contribute to maximum sustainable employment. They agreed, however, to keep the OCR unchanged at this meeting given the heightened uncertainty with the country in a lockdown. https://www.rbnz.govt.nz/news/2021/08/official-cash-rate-on-hold-at-025-percent
In Australia, the outbreak has gone from bad to worse and this will be reflected in weaker economic data for Q3.
The prelim PMIs for Aug will provide the first view of the impact of renewed restrictions and outbreaks on the growth momentum. Also, out this week will be the US PCE data for July including the Fed preferred measure of inflation and the final read of the University of Michigan consumer sentiment for Aug.
The US Treasury will settle $260bn in ST Bills and FRN’s, raising approx. $2bn in new money. Approx. $18bn in ST Bills will mature on the Fed balance sheet and will be rolled over. The US Treasury will auction the 2yr, 5yr, and 7yr Notes this week – to settle on 31 Aug next week.
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
by Kim | Aug 16, 2021
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
