> The Fed’s meeting with a press conference and a press release on Wednesday. Two questions: are disagreements between FOMC members remain as high as in September ? Will the Fed cut its target rate ? The dots graph suggests a third cut this year.
> Christine Lagarde will replace Mario Draghi as president of the ECB next Friday. The balance between politics and economics will be different than in the current mandate. The main task for Christine Lagarde will be to maintain the cohesion of the ECB members at a moment where the monetary policy is already very accommodative and the impact of a change will be questioned and lower than in the past.
> On the Brexit side, a vote is expected today on the possibility of general elections on December the 12th Boris Johnson will probably not have the qualified majority for it.
The EU, in a draft, has proposed an extension of the Brexit until the end of next January.
> GDP figures will be released this week in the US and in France (30) and in the Euro Area, Italy and Spain (31). Expectations are on lower figures than in the second quarter. This would be consistent with the business surveys seen during this third quarter.
> ISM index for the manufacturing sector (November 1) will be key to anticipate the business cycle profile in the US. The index was below the 50 threshold in August and September.
> The Chinese official PMI index (31) and the Markit index for the manufacturing sector (1st )
> The Markit indices for the manufacturing sector will be released on November the 1sr except on Continental Europe.
> The US employment report next Friday. The momentum is lower than in the first part of the year even with a very low unemployment rate
> Inflation flash estimates will be released in Europe this week. (Euro Area 31). As the oil price is on average lower than in September (53.7 € in October vs 56.7€ in September ) and has to be compared with a high level in October 2018 (70.3€). The energy contribution will be strongly negative and the inflation rate will be probably below the 0.8% seen in September.
> Corporate surveys will highlight the business cycle foreseeable future. The IFO will be released on Tuesday 24 as will be the French Climat des Affaires. The French momentum is currently higher than in Germany as this latter is more exposed to the international backdrop. The Italian survey on corporate confidence will be out on September the 27th and may show the impact of a pro-European government on corporate confidence.
> Markit surveys, flash estimates, will be released on Monday the 23rd for the Euro Area, France, Germany and the US. The Japanese release will be done on September the 24th. These surveys are important but I will carefully look at the New Export Order indices in the Euro Area, US and Japan. Its average is clearly consistent with the world trade profile. In August it was as low as 46.6 giving a signal of continuous contraction in trade. September date will be important.
> Consumer confidence in the US (24 for the conference board and 27 for the Michigan), in France (25), Germany(26) and Italy (27). The US conference board will give us relevant signals on the US labor market dynamics. France index will remain above its average, way above the level it has a year ago when the yellow vests demonstrations started.
> Consumption expenditures in the US (27) and Fed’s preferred measure for inflation for August will be released on August the 27th. Consumers’ behavior is the strongest support of the current US growth momentum. Nevertheless it can be very volatile. We expect that it will be strong in August, consistently with retail sales. No strong expectations on inflation. The July core inflation rate is 1.6%.
> Inflation for September in France and Spain. > New Home sales in August in the US. The real estate market has been stronger recently. A confirmation is expected as interest rates were low in August.
External trade for Germany is the statistics I will focus on this week (July 8). Since the beginning of the year, real exports are slowing down as a consequence of the trade war. Expectations are negative and this is a source of concern for the German growth momentum. The German government may have, in coming weeks, an opportunity to boost domestic demand to cushion this disruption.
The Chinese external trade will also be a major indicator (July 12) as a measure of the trade war impact.
The German industrial production index will also show a slowdown in May (July 8). This would be consistent with expectations on its external trade and with corporate surveys that reflect pessimism. The other point to mention here is that the UK industrial production will show a downward trend (July 11). This would be consistent with the Markit index for the manufacturing sector. In May the Markit synthetic index was at 49.4 (from 53.1 in April).
The US inflation rate for June (July 11) will slow as seen in European inflation rates for June (flash estimates) while the Chinese will remain strong (2.7% in May) as food price (pork price precisely) will continue to push up the price index.
Financial Stability Report by the Bank of England (July 11 at 1130 CET), Minutes of the last FOMC meeting (June 18-19) on July 10 (2000 CET) and Minutes of the last ECB meeting (June 5-6) on monetary policy (July 11 at 1330 CET)
Chinese trade figures, industrial production and retail sales for May are key to see how China cushions the negative international trade shock. Weak number would imply new measures to support domestic demand
The US economy is slowing down on industrial side. This was shown by the ISM manufacturing index in April and the industrial production index is trending downward since the beginning of the year. A negative figure on industrial production for May (June 14) may accelerate the Fed’s monetary policy change (next meeting June 19).
This change in the Fed’s strategy may also reflect a lower inflation rate. CPI figure will show a lower headline inflation (2% in April) and stable core inflation rate. Retail sales (June 14) are volatile reflecting a weaker domestic demand. This could add up to CPI and industrial production in the Fed’s decision in June.
After weak figures in the in April, the Euro Area industrial production index (June 13) will be down. May be is it the signal Draghi mentioned yesterday in his press conference to move the ECB monetary policy on a more accommodative ground
The price of oil is, on December 19, 20% below its 2018 average. The contribution of energy to the inflation rate will quickly be negative. Inflation will fall below 1% in the euro zone in 2019. (The energy price is the main source of fluctuations of the inflation rate. Sometimes on the upside sometimes on the downside. Currently it’s on the downside)
For a zero contribution to inflation, on average over 2019, the price of oil should increase by 25% It is only above this 25% increase, on average in 2019, that inflation will go above underlying inflation (close to 1%). No rush for the ECB to change its mind on monetary policy