Written Commentary
Ag Market View for July 26.24
July 26, 2024
US CPI dominates busier schedule; UK labour data, India WPI, dovish RBA speech to digest; US NFIB and Norway Regions surveys, Canada Manufacturing Sales ahead; IEA Oil Market Report and California election; Italy, UK, Netherlands and Germany bond sales
UK labour demand robust, wage growth flattered by base effects; looming end of furlough scheme the near term challenge
US NFIB survey: renewed expected; hiring and supply disruption challenges imply downside risks, above all to expectations
US CPI seen remaining high but easing slightly as re-opening pressures ebb, but housing and storm related energy pressures impart upside risk
EVENTS PREVIEW
A busier schedule of data and events awaits, though the US CPI data will clearly be front and centre, and the rest of the schedule will be very much subordinate. There are UK labour data and India’s WPI to digest, while Swedish CPI, Norges Bank’s quarterly Regions and US NFIB surveys, and Canada’s Manufacturing Sales lie ahead, along with central bank speakers (BoE’s Bailey and ECB’s Fernandez-Bollo, following from the doggedly dovish message from RBA governor Lowe overnight). There are also the IEA’s monthly Oil Market Report and the Recall election in California. Government bond supply takes the form of UK 5-yr, Italian 3, 7 & 30-yr and German 2-yr.
** U.K. – July/August Labour data **
– Another solid labour market report with the August Claimant Count dropping 58.6K, while HMRC Payrolls rose +241K and Vacancies rose to a fresh record of 1.034 Mln, while the less timely LFS Employment measure up 183K broadly in line with forecasts, with Average Hourly Earnings at 8.3% y/y still heavily flattered by base effects (July 2020 -1.0% y/y). However as noted in the Week Ahead, the fact remains that there were still 1.6 Mln people on the furlough scheme in July, and when the scheme ends at the end of this month, there are still expected to be 1.0 Mln on it, suggesting Q4 may see a less propitious trend, as signalled overnight by the report from ABTA talking of a wave of layoffs in the travel sector once the scheme concludes.
** U.S.A. – August CPI / NFIB Small Business Optimism **
– Headline (0.4% m/m 5.3% y/y) and core (0.3% m/m 4.3% y/y) CPI are expected to ease very slightly, as re-opening pressures ease (see attached chart) and/or are checked by rising infection rates. But with storm damage and chip shortages likely to continue to pressure energy and new auto prices, and housing prices also weighing more heavily in the equation over the next 12 months (OER is running at a 3-mth annualized rate of 4.8%), there are some upside risks for today’s report, and the Fed’s transitory ‘narrative’ is going to face some quite severe challenges in coming months as inflation is likely to remain elevated well into 2022. The August NFIB Small Business Optimism Index is expected to dip further to 99.0 from 99.7, and as has been the case for some months, the key determinant is likely to be Expectations, which remain at rock bottom levels having dropped back gain in July to -20.0 (see chart), despite other measures such as Plans to Hire, CapEx plans and Selling Prices all being at or close to their highs.
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ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
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