The Week Ahead: Highlights

Asia-Pacific Preview

Inflation Reports in Focus

By Brian Jackson, Econoday Economist

August inflation data will be the main focus in the Asia-Pacific region in the week ahead, with supply disruptions and higher fuel prices caused by the Iran conflict likely to have an ongoing impact. Headline CPI inflation in China fell to a six-month low in July, largely reflecting a big drop in food prices, but producer price inflation has remained near multi-year highs. This weeks data may show ongoing strength in producer prices, with PMI survey data published this week showing stronger growth in input costs in both the Chinese manufacturing sector and services sector in August.

Taiwan and Thailand will also report inflation data. CPI inflation in Taiwan rose from 1.2 percent in March to 2.6 percent in June before easing slightly to 2.54 percent in July, and this weeks number will be followed later this month by the next quarterly meeting of Taiwans central bank. Policy rates in Taiwan have been on hold since early 2024. Thailands CPI inflation rate has fallen in each of the three previous months after a sharp spike in April, and officials from the Bank of Thailand last month expressed confidence about the inflation outlook when they left policy rates on hold.

Ongoing disruptions in access to the Strait of Hormuz may have some impact on August trade data from China and Taiwan, though this will likely be offset by ongoing strong AI-related demand. South Korea already reported August trade data this week and that showed another month of very strong export growth. South Korea will report revised GDP data for the three months to June next week, after advance data showed weaker growth on the quarter.

Monthly business and consumer sentiment surveys for Australia should provide an updated indication of the response to recent policy decisions by the Reserve Bank of Australia. After three rate hikes earlier in the year, the RBA left rates on hold for the second meeting in a row last month, judging that the economy is now slowing "as expected" after that previous tightening. This weeks surveys may provide further evidence of this impact.

US Preview

Inflation Readings in Week Ahead to Guide FOMC

By Theresa Sheehan, Econoday Economist

The September 7 week begins with the federal holiday of Labor Day. It will be a full market close for stocks and bonds. However, it is a light data week but inflation reports will be important.

The communications blackout period around the upcoming FOMC meeting on September 15-16 goes into effect at midnight on Saturday, September 5 and runs through midnight on Thursday, September 16. Fed policymakers will be silent on the topic of monetary policy during this time. Some especially Chair Kevin Warsh have recently expressed their concerns about price stability. In the absence of forward guidance, it sounds like a rate hike is under consideration. However, all will say that no decision is made until the actual deliberations.

This week will see two important reports for August for gauging the state of inflation. The final-demand producer price index (PPI) is at 8:30 ET on Thursday and the consumer price index (CPI) is at 8:30 ET on Friday. The behavior of energy prices underlies expectations for both reports.

Energy prices have been moving higher in recent weeks. The PPI takes its reading on oil prices in the second week of the month. The price in the August 14 week was up to $84.05 for a barrel of WTI compared to $72.26 in the July 10 week. More critical than the month-to-month fluctuations in oil prices is the cost of motor fuels. While the price of a gallon of regular gasoline has been fairly steady just above $4 per gallon, the cost of diesel fuel is on the rise. This means increased transportation costs for goods and services that will be passed on to other businesses and consumers.

The CPI in June and July pointed to moderation in upward price pressures for consumers but not enough that Fed policymakers withdrew the term elevated to describe inflation. At best, the August CPI will be a plateau of the recent annual trend. More likely, energy prices and pass-through from the producer level will push the index up again. If so, Warshs repeated statements about the FOMCs commitment to bringing down inflation and the use of interest rates as the primary tool of monetary policy point to higher rates in the near future.

The Week Ahead: Econoday Consensus Forecasts

Monday

Germany Industrial Production for July (Mon 0800 CEST; Mon 0600 GMT; Mon 0200 EDT)

Consensus Forecast, M/M: 0.1%

Consensus Range, M/M: -1.0% to 0.5%

Consensus Forecast, Y/Y: -0.5%

Consensus Range, Y/Y: -1.0% to 0.4%

The consensus sees industrial output up 0.1 percent on the month but down 0.5 percent on year as activity remains very sluggish.

Switzerland Unemployment Rate for August (Mon 0900 CEST; Mon 0700 GMT; Mon 0300 EDT)

Consensus Forecast, Adjusted: 3.1%

Consensus Range, Adjusted: 3.1% to 3.1%

Jobless rate expected flat at 3.1 percent.

Eurozone GDP for Second Quarter (Mon 1100 CEST; Mon 0900 GMT; Mon 0500 EDT)

Consensus Forecast, Q/Q: 0.4%

Consensus Range, Q/Q: 0.4% to 0.4%

Consensus Forecast, Y/Y: 1.0%

Consensus Range, Y/Y: 0.9% to 1.0%

The consensus looks for no revision in growth from the flash at 0.4 percent on quarter and 1.0 percent on year.

Tuesday

South Korea GDP for Second Quarter (Tue 0800 KST; Mon 2300 GMT; Mon 1900 EDT)

Consensus Forecast, Q/Q: 0.6%

Consensus Range, Q/Q: 0.6% to 0.6%

Consensus Forecast, Y/Y: 3.7%

Consensus Range, Y/Y: 3.7% to 3.7%

Second quarter GDP growth rates are expected unrevised at 0.6 percent on quarter and 3.7 percent on year.

Japan GDP for Second Quarter (Mon 0850 JST; Sun 2350 GMT; Sun 1950 EDT)

Consensus Forecast, Q/Q: 0.4%

Consensus Range, Q/Q: 0.3% to 0.7%

Consensus Forecast, Y/Y: 0.9%

Consensus Range, Y/Y: 0.8% to 0.9%

Japans gross domestic product for the April-June quarter is expected to be revised up slightly, driven by an improvement in corporate spending after the initial reading showed a much sharper-than-expected decline, while private consumption remained weak and public investment revised down from the preliminary reading.

The underlying economy is expected to remain resilient, with real GDP projected to grow for a third consecutive quarter despite strong headwinds. Geopolitical tensions in the Middle East and the yens weakness pushed up import costs, while the government managed to contain gains in energy prices by providing subsidies and taking measures to release strategic oil reserves.

Japanese corporations have also benefited from persistent global demand related to artificial intelligence, including the construction of data centers around the world, providing a solid footing for the economy.

Real capital investment is expected to be revised up to a 0.8 percent decline on the quarter in the April-June period from a 1.2 percent decline in the preliminary reading released on Aug. 17. This is seen as one of the reasons for the expected upward revision in second-quarter GDP growth to 0.4 percent on the quarter from the initial reading of 0.3 percent.

On an annualized basis, the economy is seen being revised up to a 1.6 percent increase from the preliminary reading of 1.1 percent, while slowing from the 2.1 percent gain in the previous quarter. Compared with a year earlier, GDP is projected to expand 0.9 percent, up from the preliminary result of a 0.7 percent increase.

China Merchandise Trade for August (ANYTIME)

Consensus Forecast, Balance of Trade: $123.3 B

Consensus Range, Balance of Trade: $107.0 B to $123.3 B

Consensus Forecast, Exports - Y/Y: 27.4%

Consensus Range, Exports - Y/Y: 24.1% to 28.2%

Another blowout trade surplus is expected at $123.3 billion in August after $112.5 billion in July as exports show another massive gain.

US NFIB Small Business Optimism Index for August (Tue 0600 EDT; Tue 1000 GMT)

Consensus Forecast, Index: 99.4

Consensus Range, Index: 99.0 to 99.7

A slight erosion in business sentiment expected to 99.4 in August from 99.8 in July as energy costs rebound.

Wednesday

China CPI for August (Wed 0930 CST; Wed 0130 GMT; Tue 2130 EDT)

Consensus Forecast, Y/Y: 0.9%

Consensus Range, Y/Y: 0.5% to 0.9%

The consensus looks for another muted inflation reading with CPI at 0.9 percent on year in August versus 0.5 percent in July.

China PPI for August (Wed 0930 CST; Wed 0130 GMT; Tue 2130 EDT)

Consensus Forecast, Y/Y: 3.7%

Consensus Range, Y/Y: 3.2% to 3.7%

A slight uptick is expected to 3.7 percent for wholesale price inflation in year in August from 3.5 percent in July.

Thursday

Germany CPI for August (Thu 0800 CEST; Thu 0600 GMT; Thu 0200 EDT)

Consensus Forecast, M/M: 0.2%

Consensus Range, M/M: 0.2% to 0.2%

Consensus Forecast, Y/Y: 2.9%

Consensus Range, Y/Y: 2.9% to 2.9%

Consensus Forecast, HICP - M/M: 0.2%

Consensus Range, HICP - M/M: 0.2% to 0.2%

Consensus Forecast, HICP - Y/Y: 2.9%

Consensus Range, HICP - Y/Y: 2.9% to 2.9%

No revision seen from the flash at 0.2 percent on month and 2.9 percent on year.

Eurozone ECB Announcement (Thu 1415 CEST; Thu 1315 GMT; Thu 0915 EDT)

Consensus Forecast, Refi Rate Change: 25 bp

Consensus Range, Refi Rate Change: 25 bp to 25 bp

Consensus Forecast, Refi Rate Level: 2.65%

Consensus Range, Refi Rate Level: 2.65% to 2.65%

Consensus Forecast, Deposit Rate Change: 25 bp

Consensus Range, Deposit Rate Change: 25 bp to 25 bp

Consensus Forecast, Deposit Rate Level: 2.25%

Consensus Range, Deposit Rate Level: 2.25% to 2.25%

The ECB has pretty much stated it will raise rates by 25 bp this time so the only mystery is whether they will go again at the next meeting.

US Jobless Claims for Week of September 05 (Thu 0830 EDT; Thu 1230 GMT)

Consensus Forecast, Initial Claims - Level: 208K

Consensus Range, Initial Claims - Level: 202K to 210K

Claims expected at 208K versus 206K last week as they remain stable in the recent range above 200K.

US PPI-Final Demand for August (Thu 0830 EDT; Thu 1230 GMT)

Consensus Forecast, PPI-FD - M/M: 0.4%

Consensus Range, PPI-FD - M/M: 0.3% to 0.5%

Consensus Forecast, PPI-FD Y/Y: 5.3%

Consensus Range, PPI-FD Y/Y: 4.5% to 5.3%

Consensus Forecast, Ex-Food & Energy - M/M: 0.3%

Consensus Range, Ex-Food & Energy - M/M: 0.2% to 0.4%

Consensus Forecast, Ex-Food & Energy Y/Y: 4.6%

Consensus Range, Ex-Food & Energy Y/Y: 4.1% to 4.7%

PPI-FD expected to bounce to an increase of 0.4 percent on the month in August after a flat reading in July as energy prices rose again. Ex-food & energy, the call is 0.3 percent versus 0.2 percent in July. The core is seen up a nasty 4.6 percent on year.

US Existing Home Sales for August (Thu 1000 EDT; Thu 1400 GMT)

Consensus Forecast, Annual Rate: 3.97 M

Consensus Range, Annual Rate: 3.90 M to 4.05M

Rising mortgage rates to depress sales to a 3.97 million unit rate in August from 4.06 million in July.

Friday

Japan PPI for August (Fri 0750 JST; Thu 2350 GMT; Thu 1950 EDT)

Consensus Forecast, M/M: 0.0%

Consensus Range, M/M: -0.5% to 0.4%

Consensus Forecast, Y/Y: 7.4%

Consensus Range, Y/Y: 6.9% to 7.8%

UK Monthly GDP for July (Fri 0700 BST; Fri 0600 GMT; Fri 0200 EDT)

Consensus Forecast, M/M: 0.0%

Consensus Range, M/M: -0.1% to 0.1%

GDP seen flat in July from June after rising 0.3 percent in June from May.

US CPI for August (Fri 0830 EDT; Fri 1230 GMT)

Consensus Forecast, CPI - M/M: 0.4%

Consensus Range, CPI - M/M: 0.3% to 0.4%

Consensus Forecast, CPI - Y/Y: 3.4%

Consensus Range, CPI - Y/Y: 3.4% to 3.5%

Consensus Forecast, Ex-Food & Energy - M/M: 0.2%

Consensus Range, Ex-Food & Energy - M/M: 0.2% to 0.3%

Consensus Forecast, Ex-Food & Energy - Y/Y: 2.4%

Consensus Range, Ex-Food & Energy - Y/Y: 2.4% to 2.5%

Energy costs are expected to boost CPI again in August with an increase of 0.4 percent on month and 3.4 percent on year.

US Consumer Sentiment for September (Fri 1000 EDT; Fri 1400 GMT)

Consensus Forecast, Index: 51.2

Consensus Range, Index: 50.0 to 52.5

Sentiment expected even bleaker at 51.2 in September, down from 51.7 in August and 55.2 in July. Consumers remain upset about inflation.