ECONOMICS COMMENTARY — Jun 25, 2023
Week Ahead Economic Preview: Week of 26 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.
US, Canada, Eurozone inflation readings in focus
A series of inflation readings will be highlights in the final week of June as markets grapple with the likelihood of further interest rate hikes. Specifically, US core PCE will be due, in addition to Canada and eurozone CPI. US consumer spending will also shed light on the expected inflation path while UK GDP and industrial production figures from various APAC economies will help assess recession risks.
The scale was tipped towards Fed concerns last week in the oscillation between tech enthusiasm and rate hike worries for the market. A reiteration of the likelihood for further rate hikes by Fed chair Jerome Powell weighed on equities just a week after the Federal Open Market Committee meeting held rate steady at its June meeting, and this focus may well persist in the coming week with more Fed comments anticipated. The latest S&P Global Flash US Composite PMI brought some mixed signals on inflation. Although average selling prices for goods and services rose at the slowest rate for over two years, upward wage pressures pushed firms' input cost inflation higher. Clearly the labour market, and in particular the service sector's job market, remains the economy's hot spot and will stay firmly in the Fed's focus.
Official data including US personal income and spending will also be keenly followed after April data added to concerns over rising prices. A clutch of US housing market data is also released, as well as the final estimate of first quarter US GDP, durable goods orders and consumer confidence.
In Europe, a new estimate of first quarter GDP in the UK is accompanied by mortgage approvals, the latter being keenly awaited for signs of housing market stress amid higher interest rates. The eurozone sees inflation, consumer confidence and unemployment updates,
NBS PMI readings from mainland China will meanwhile be due Friday ahead of the S&P-compiled Caixin figures, both watched for indications of mainland China's economic performance after officials lowered interest rates.
Finally, a series of industrial production figures will be due from several export-oriented APAC economies, which will help assess local trends as well as the broader health of the global manufacturing economy. S&P Global Asia Sector PMI had previously highlighted continued weakness in the goods producing sector as compared to services resilience in May.
Flash PMI data for June signal cooler global price trends amid mounting growth risks
Last week's flash PMI data point to downside risks to global economic growth in the near term. Manufacturing in major developed economies continues to report an increasingly severe downturn in demand of the like not seen since 2009, and the service sector's recent post-pandemic spending surge shows signs of being overwhelmed by the rising cost of living and higher interest rates.
The Eurozone and, to a lesser extent, the UK are looking especially vulnerable to possible recessions according to the PMI data, though further Fed rate hikes would add to US growth risks in the second half of the year.
Meanwhile the survey data suggest that the fight against inflation is being won. Encouragingly, inflation pressures have disappeared in manufacturing and are cooling in services - the latter having been a major source of concern in recent months as higher prices were linked to rising labour costs. Consumer price inflation should therefore continue to moderate - potentially markedly in the US, Eurozone. An outlier is the UK, where services price trends appear stubbornly elevated, though even here the direction of travel is encouraging.
Read more in this week's special report.
Key diary events
Monday 26 Jun
Japan BOJ Summary of Opinions (Jun)
Singapore Industrial Production (May)
Germany Ifo Business Climate (Jun)
Taiwan Industrial Production (May)
Tuesday 27 Jun
Taiwan Consumer Confidence (Jun)
Taiwan Unemployment Rate (May)
Malaysia PPI (May)
Hong Kong SAR Trade (May)
Canada Inflation (May)
United States Durable Goods Orders (May)
United States Home Price Index (Apr)
United States Consumer Confidence (Jun)
United States New Home Sales (May)
United States Building Permits (May, final)
Wednesday 28 Jun
India Market Holiday
South Korea Consumer Confidence (Jun)
China (Mainland) Industrial Profits (May)
United States Trade Balance (May)
United States Wholesale Inventories (May)
Thursday 29 Jun
Singapore, Indonesia, Malaysia, Philippines Market Holiday
South Korea Consumer Confidence (Jun)
Japan Retail Sales (May)
Japan Consumer Confidence (Jun)
Australia Retail Sales (May)
Singapore PPI (May)
United Kingdom Mortgage Lending and Approvals (May)
Eurozone Consumer Confidence (Jun, final)
Germany Inflation (Jun, prelim)
United States GDP (Q1, final)
United States Initial Jobless Claims
United States Pending Home Sales (May)
Friday 30 Jun
South Korea Industrial Production (May)
South Korea Retail Sales (May)
Japan Unemployment (May)
Japan Industrial Production (May, prelim)
China (Mainland) NBS PMI (Jun)
Thailand Current Account (May)
Germany Retail Sales (May)
Germany Unemployment (Jun)
United Kingdom GDP (Q1, final)
Eurozone Unemployment (May)
Eurozone Inflation (Jun, flash)
India Current Account (Q1)
Canada GDP (May, prelim)
United States Personal Income and Spending (May)
United States Core PCE (May)
United States UoM Sentiment (Jun, final)
* Press releases of indices produced by S&P Global and relevant sponsors can be found here.
What to watch
Americas: US core PCE, consumer confidence, personal income and spending, Fed comments, Canada inflation
Following the release of US CPI for May, which showed the continued cooling of inflationary pressures, the Fed's favourite price gauge - the US core PCE index - will be updated on Friday. The market will be looking for the core PCE price index to ease from the 0.4% month-on-month (m/m) reading in April, albeit slightly to 0.3% m/m. Other data in the spotlight includes consumer confidence readings and personal income and spending. While personal income is expected to remain resilient, spending growth may ease from the 0.8% in April, which does not bode well for growth. Final Q1 GDP will also be released.
Additionally, inflation figures from Canada will be closely watched after unexpectedly reaccelerating in April. Consensus expectations point to slight cooling in May in line with the easing of selling price inflation for goods as indicated by the S&P Global Canada Manufacturing PMI.
Europe: Eurozone inflation, UK GDP, German Ifo
Post the release of the flash PMI figures, official eurozone flash CPI will be due Friday for insights into the price trends. May headline inflation fell more than expected to 6.1% though the European Central Bank (ECB) continued to see elevated inflation, raising their headline and core expectations in the June meeting. The upcoming inflation figures will therefore be closely watched for signs of worsening that may warrant further hawkishness from the ECB. Meanwhile, final Q1 GDP will be released from the UK with no changes expected.
Asia-Pacific: Australia retail sales, China NBS PMI, Japan, Singapore, Taiwan, Thailand, South Korea industrial production
In APAC, Australia updates retail sales figures for May after seeing growth stalling in April amid heightened price pressures. Recent Australia PMI data indicated a softening of manufacturing new orders with the Judo Bank Australia SME Business Activity Index likewise showing manufacturing SMEs under pressure as new orders fell for the sixth straight month in May.
A series of official industrial production figures will be due from APAC economies for the latest insights into goods production trends, notably including Japan, South Korea and Taiwan.
Special reports
Flash PMI data for June signal cooler global price trends amid mounting growth risks - Chris Williamson
APAC tourism surges in first half of 2023 - 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.
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