The week ahead: 1 - 5 July 2024
These are the Key Macro Events for the upcoming week.
United States – Friday sees the release of May labor figures. We expect the non-farm payroll to come in at 215k, on the back of job growth in various services industries. The household survey will likely show unemployment rate unchanged at 4.0%.
Earlier in the week, we get the ISM manufacturing and services indices. The manufacturing index has been conflicting with the S&P PMI, generally being more negative. The PMI rose again earlier this month, we expect the ISMs to converge upwards. Wednesday also marks the release of the June FOMC meeting minutes. We will be looking for discussions on the recent inflation figures, the dot plot, and in particular the labor market.
Eurozone – German factory orders and German industrial production figures for May are published next week. The May data likely show small increases on a monthly basis for both new factory orders as well as industrial production as was already reflected in the May manufacturing PMI data. Both series however are highly volatile on a monthly basis. Zooming out, the German industrial sector is still in contractionary territory but is slowly bottoming out. Demand for the sector is still weak, preventing a strong recovery in the coming months.
June HICP inflation out on Tuesday will be the main focus for markets. The data already released for France, Spain and Italy suggests a resumption in disinflation for the eurozone aggregate following the strength May, with the headline HICP expected to fall to 2.4% from 2.6%. This will be driven by a renewed drag from energy, reflecting the recent falls in the PPI. We also expect a softening in the important services component of inflation, which would bring core inflation down to 2.7% from 2.9%. A report like this would give comfort to the ECB, though we still expect the Governing Council to wait for Q2 wage data out in late July and August before it proceeds with another rate cut in September.
For unemployment, we expect a slight rise to 6.5% in May, driven by weakness in the German labour market. Finally, the ECB's Sintra conference will be worth watching for further clues on the path of rates. Of particular note is a panel chaired by Chief Economist Philip Lane on Wednesday on the neutral rate. The minutes of the June GC meeting will also be released on Thursday.
The Netherlands – The flash CPI estimate for June is expected to slightly edge up compared to the May figure, coming in at 2.9% (May: 2.7%). This small uptick will mostly be driven by a less negative contribution of industrial goods prices in the inflation figure. The energy and food components are expected to contribute roughly the same as for the May figure, while the services inflation contribution is expected to edge down marginally. Generally speaking, inflation is continuing its downward trend, although prices of products with a large wage component (such as labour-intensive services), cause the downward path to take longer.
China – China’s June PMIs due next week are generally expected to show ongoing divergence between 1) the two manufacturing PMIs and 2) manufacturing and services. On the manufacturing side, consensus expectation is for the official one (due Sunday) to stay below the neutral 50 mark separating expansion from contraction, while Caixin’s equivalent (Monday) - which focuses more on export-oriented, and private firms – is expected to remain in expansion territory. On the services side, consensus expectation is for quite a stable official index (Sunday), while Caixin’s services PMI (Wednesday) is foreseen to come down but to remain well above the neutral mark.
France & UK elections – The first round French assembly election takes place on Sunday, with the second round on 7 July. Polls suggest the far right RN party will gain enough seats to form the next government, but that it is unlikely to get an absolute majority (see our ). In the UK election on Thursday, polls suggest the centre-left Labour party will win by a landslide (see our newest ).