ECONOMICS COMMENTARY — Jun 09, 2023
Week Ahead Economic Preview: Week of 12 June 2023
The following is an extract from S&P Global Market Intelligence's latest Week Ahead Economic Preview. For the full report, please click on the 'Download Full Report' link.
Central bank meetings in focus
Central bank meetings in the US, eurozone, Japan, Taiwan and Hong Kong SAR will be the highlights next week as we hear central bankers' views on recent economic trends. Further insights into economic conditions will nevertheless be drawn from various data releases including US CPI, as well as retail sales and industrial production figures from both the US and mainland China. The UK will also publish official labour market and growth figures while the eurozone issues revised inflation numbers.
With the US debt ceiling issue out of the way, risk sentiment recovered this week, though the focus has returned to the Fed ahead of the June 13-14 Federal Open Market Committee meeting. The current consensus points to the Fed pausing in June amid slowing inflation, whereby expectations are for further easing of CPI growth in May. That said, the key lies with what the Fed will do next as the US central bank may merely pause and resume their lifting of rates from July. Projections and Fed chair Jerome Powell's views will therefore be key, with additional interest on the Fed's take towards stubborn looking service sector inflation and a resilient job market, juggled against an already-fragile manufacturing sector.
Likewise with the European Central Bank, another hike in June appears to be on the cards, but whether the ECB will continue hiking beyond June is less certain given recent indications of a slowdown in growth and cooling price pressures. Divergences in global inflationary trends persisted in May with global manufacturers seeing average prices charged falling for the first time in three years. This split in price trends was also evident in the eurozone, with recent ECB comments highlighting the aggravation of services inflation as a worrying trend.
Across in the UK, April GDP growth figures and labour market data will be watched at the country continues to deal with particularly sticky inflation. Policymakers will be especially keen to assess recent pay growth developments.
Finally, amid recent risk-on sentiment in the US equity market and with global supply chains remaining on the mend, the S&P Global Investment Manager Index and the GEP Supply Chain Volatility Index will be two pertinent studies to add to one's reading list.
The return of the banker
One of the particularly noteworthy findings from the latest S&P Global PMI surveys was the degree to which global growth was led by the financial services industry in May, for which a broad-based upturn was recorded across the US, Europe and Asia. Global demand for financial services grew at one of the steepest rates since 2014, with new business placed at banks surging at rate amongst the quickest seen since comparable data were available in 2009.
The upturn is accompanied by rising charges for financial services, however, which also rose at a rate well above anything seen prior to the pandemic. Rising financial services charges therefore represent a major source of upward pressure on overall inflation in the global economy, hinting that rising interest rates are stoking the fire they are seeking to quell, in the short term at least.
Key diary events
Monday 12 Jun
Australia, Philippines Market Holiday
Japan PPI (May)
Indonesia Consumer Confidence (May)
Malaysia Retail Sales (Apr)
India Industrial Production (Apr)
India Inflation (May)
China (Mainland) M2, New Yuan Loans, Loan Growth (May)
Tuesday 13 Jun
South Korea Market Holiday
Indonesia Retail Sales (Apr)
United Kingdom Labour Market Report (Apr)
Germany Inflation (May)
Germany ZEW Economic Sentiment (Jun)
United States CPI (May)
S&P Global Investment Manager Index*
GEP Global Supply Chain Volatility Index*
Wednesday 14 Jun
South Korea Import and Export Prices (May)
New Zealand Current Account (Q1)
South Korea Unemployment Rate (May)
China (Mainland) FDI (May)
United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Apr)
United Kingdom Balance of Trade (Apr)
India WPI Inflation (May)
Eurozone Industrial Production (Apr)
United States PPI (May)
United States Fed FOMC Meeting
Thursday 15 Jun
New Zealand GDP (Q1)
Japan Balance of Trade (May)
Japan Machinery Orders (Apr)
Australia Employment Change (May)
China (Mainland) House Prices (May)
China (Mainland) Industrial Production, Retail Sales, Unemployment Rate, Urban FAI (May)
Hong Kong HKMA Interest Rate Decision
Indonesia Trade (May)
Germany Wholesale Prices (May)
Taiwan CBC Interest Rate Decision
Eurozone ECB Interest Rate Decision
Eurozone Balance of Trade (Apr)
India Trade (May)
United States Retail Sales, Industrial Production (May)
Friday 16 Jun
Singapore NODX (May)
Japan BOJ Interest Rate Decision
Eurozone Inflation (May, final)
United States UoM Sentiment (Jun, prelim)
* Press releases of indices produced by S&P Global and relevant sponsors can be found here.
What to watch
Americas: Fed FOMC meeting, US May inflation, retail sales and industrial production data
Next week's highlight will be the June 13-14 Federal Open Market Committee (FOMC) meeting with the consensus pointing towards a pause in rates at the current 5.00%-5.25% but with much uncertainty about what comes next. As such the updated forecasts will be key alongside comments from Fed chair Jerome Powell at the press conference.
Recent Fed comments again emphasised the importance of data and the latest May S&P Global US Composite PMI revealed still-elevated inflation, underpinned by price increases in the service sector, which could keep the Fed on a tightening bias. Official May CPI figures, due Tuesday, will also be important with the consensus suggesting a slight slowdown to 0.3% month-on-month (m/m).
Europe: ECB meeting, eurozone inflation, UK GDP
Another 25 basis point rate hike by the European Central Bank has been pencilled in for next week's meeting against the current backdrop of elevated core inflation. That said, given recent PMI indications of a slowdown in eurozone growth and cooling of inflationary pressures, expectations have mounted that peak rates may not be far away, hence rhetoric from the ECB will be in focus next week.
The UK statistics office meanwhile releases labour market and monthly GDP data. UK's private sector output continued to expand in April according to the S&P Global / CIPS UK Composite PMI, though this was underpinned by growth in services activity as manufacturing output contracted.
Asia-Pacific: BoJ, CBC, HKMA meetings, China retail sales and industrial production, India inflation
Central bank meetings in Japan, Taiwan and Hong Kong SAR will unfold in the coming week with little surprises expected. Data-wise, China's retail sales and industrial production will be scrutinised for assessment of the extent to which consumer confidence and manufacturing output have recovered.
Investment Manager Index and Supply Chain Volatility
June's S&P Global Investment Manager Index provides insights into the latest thoughts from US investment managers while the GEP Supply Chain Volatility Index will be a unique study providing indications on the extent to which supply chains have further healed.
Special reports
Global Growth at One-and-a-half Year High in May as Demand for Services Continues to Revive - Chris Williamson
Vietnam Economy Hit by Slumping Exports and Power Blackouts - Rajiv Biswas
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Purchasing Managers' Index™ (PMI®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.