The week ahead: 22 - 26 July 2024

United States – In the upcoming week we get the first estimate of Q2 real GDP growth and the various PCE releases. We expect annualized quarterly GDP growth to come in at 1.9%. The headline figure comes from a similar 1.7% annualized quarterly figure for real consumption growth. Residential investment has likely come down after a strong first quarter. A widened trade deficit will likely subtract from the figure through negative net exports.

Based on the CPI and PPI readings earlier this month, we expect 0.1% m/m readings for both headline and core PCE inflation, leading to 2.5% y/y for both. Despite the benign inflation reading, we expect both nominal personal spending and income to have increased by 0.4% m/m, with the latter coming down from last month amidst a softening labor market.

Eurozone – Next Wednesday eurozone as well as French and German PMI’s will be published. We expect the eurozone services PMI to indicate continued expansion in the services sector, helped by real wage gains of households. However on a monthly basis the services PMI is expected to soften slightly. The eurozone manufacturing PMI is expected to stay in contractionary territory below neutral and stay at roughly similar levels compared to the June reading as demand for industrial goods has not fully bottomed out yet. As a result the composite PMI will stay roughly stagnant compared to the May reading and remain above the neutral level, consistent with our view of positive Third quarter growth for the eurozone economy.

China – After the PBoC left the 1-year medium-term lending facility rate unchanged at 2.50% last week (as expected), we expect no change in the 1-year loan prime rate (3.45%) on Monday 22 July – in line with consensus.