Macroeconomics: The Day Ahead for 20 August

Given the market focus on Fed taper timing and delta variant spread, along with the now seemingly everyday occurrence of Chinese interventions in A N Other sector, today’s run of data will have to spring some surprises, and is in any case heavily frontloaded, and dominated by the UK with GfK Consumer Confidence, Retail Sales and PSNB on the “to digest” list, accompanied Japan’s CPI, German PPI (higher than expected and underlining the extent of pipeline inflation pressures), Norway GDP and Taiwan Export Orders, with only the less than timely Canadian Retail Sales and no US data ahead. The events schedule is also thin with hawkish leaning Dallas Fed President Kaplan the only central bank speaker of note, while Deere & Co and Foot Locker feature in terms of US corporate earnings. Next week has a good volume of data, but it will be the week ending Fed Jackson Hole conference which will be front and centre. Statistically G7 flash PMIs get the week under way with a raft of national business and consumer confidence surveys in the UK and Eurozone on tap throughout the week. The US has Durable Goods Orders, Personal Income/PCE, New and Existing Home Sales, Goods Trade Balance and the first revision to Q2 GDP, Japan has Tokyo CPI, while Mexico and Brazil will also be focussing on their latest inflation readings. Outside of the Jackson Hole conference, where Powell will speak on the economic outlook, there are July ECB minutes and the Bank of Korea may well follow the RBNZ in deferring a rate hike till later in the year given pandemic developments (also being reflected in a renewed setback for the KRW vs. the USD))

U.K. – Aug GfK Consumer Confidence; July Retail Sales and PSNB

The unexpectedly sharp -2.5% m/m fall in Retail Sales will grab the headlines, and again affirms the view that the April sugar rush of pent up demand has faded quickly. However other factors were also in play, including the re-opening switch to services from goods spending, a reactive correction to the June boost from Euro 2020 and indeed the very poor weather during July. Be that as it may, estimates for private consumption for H2 will probably need to be dialled back, especially as the sharper than expected drop in July CPI would have boosted volumes estimates, though again it has to be emphasized that seasonal adjustments have been left in tatters by pandemic effects. The slip in GfK Consumer Confidence from a pandemic high of -7 to -8 was primarily driven a drop back in the large purchases climate to -3 from a high of 2 in June, while outlooks for personal finances and the economic situation were unchanged or slightly better. As for the PSNB, the somewhat better than expected outturn leaves the PSNB running at some £26.0 Bln below the OBR’s estimate for the current financial year, which in normal times would be very significant, but far less in these heavy pandemic related govt spending days.