ON DECK FOR TUESDAY, JUNE 30th
KEY POINTS:
- Bond relief on Eurozone CPI faces N.A. data tests
- EZ CPI will be softer than expected after major countries release
- Canadian GDP to track the rebound
- China’s PMIs still going nowhere fast
- US consumer confidence, JOLTS, house prices on tap
- Talk talk talk, oil little changed into more US-Iran talks
This morning’s note is a grind through an onslaught of overnight data into a wave of Canadian and US releases that will inform tracking of the Canadian economy and US labour markets plus consumer sentiment. The readings can be market moving, so take the starting position across global markets as a placeholder that so far reflects softer than expected Eurozone inflation.
Short-dated EGBs are rallying by 2–3bps after major economies released CPI figures ahead of tomorrow’s Eurozone add-up. Flat oil prices may also be helping into supposed talks between Iran and the US in Doha. Talk, talk, y’all talk too much about a fragile peace deal that had the US waving a white flag which is causing as much rancor in the US as the original motivation for war if not more so. Stocks are rallying across most major markets with Europe leading in part on slightly tamped down market odds that the ECB hikes again. The dollar is divided amid small gains and losses across major crosses but with the won continuing to slide.
China’s PMIs Remain Stagnant
China’s state purchasing manager indices came and went with little fanfare. The composite PMI was unchanged at 50.6 (50.5 prior). Given it’s soft data, the changes in the non-manufacturing (50.2, 50.1 prior) and manufacturing (50.3, 50.0 prior) readings were also moot.
Eurozone CPI Tracking Softer than Expected, ECB Hikes Tamped Down
France’s CPI fell by -0.2% m/m NSA (0% consensus) that, when combined with year-ago base effects, brought the year-over-year rate lower to 1.8% (2.0% consensus, 2.4% prior).
Italian CPI also undershot expectations at 0.1% m/m (0.2% consensus) and the y/y rate edged a tick beneath consensus and the prior reading to 3.1%.
German releases the national CPI reading at 8amET. The state level readings point to a significantly weaker than expected outcome. Four reporting states registered CPI down -0.2% m/m, one was -0.3% lower, and another was down by -0.4%. Consensus had expected the national reading to be flat and the y/y rate to be unchanged at 2.6% whereas both are now too high.
Eurozone Consumers Beat Expectations
German consumers did much better than expected, with retail sales volumes up by 1.1% m/m in May (0% consensus). Sales of food and internet orders led the way and recall that Germany’s figures exclude auto sales. The y/y rate of 1.8% suggests modest trend growth.
French consumer spending also beat expectations (0.5% m/m, 0.3% consensus) in inflation-adjusted terms during May. Still, at 0.3% y/y, a monthly blip offers little excitement.
Canadian GDP — Tracking a Rebound
Canada refreshes GDP figures that should reinforce rebound tracking in Q2. See yesterday morning’s note for a preview of the figures, but in short, April GDP is expected to rise 0.4% m/m in accordance with Statcan’s earlier preliminary guidance and is subject to possible revision with details. May’s preliminary guidance will only be accompanied by light verbal guidance on sector drivers, sans details. I’ll be looking for quarterly tracking over 2% q/q SAAR.
Colombia’s central bank is widely expected to hike by another 50bps this afternoon (2pmET). That would be the third 50bps move this year, raising the policy rate from 9.25% to 11.75%. A bigger minority of forecasters think a larger than 50bps hike could be offered than the number who think it could whiff entirely. A divided vote and data dependent guidance are expected with risk that BanRep indicates potential downsizing of future moves.
US Job Openings, Consumer Confidence, Home Prices on Tap
JOLTS job openings during May (10amET) will be of interest in terms of whether they can repeat the surge in April when openings increased to 7.618 million from 6.887. As openings have trended lower, the rate of growth of nonfarm payrolls has ebbed (chart 1). You wouldn’t use JOLTS to forecast monthly payrolls though. One reason is quality; it’s always unclear how many of the openings are expected to be filled. Another reason is timing when those openings may be filled. Also watch the openings to unemployed ratio that has rebounded over the past couple of months to ever-so-slightly above 1.0, signalling rough balance between openings and folks looking for work (chart 2).
While JOLTS can move markets, so can consumer confidence (10amET). The June reading might get a bit of a lift from lower gas prices and healthy market conditions, but it’s more driven by labour market conditions than the competing UofM sentiment measure. The resilience in nonfarm payrolls might help this morning’s reading more than UofM.
Also keep an eye on jobs plentiful within confidence as an indication of how consumers feel about job availability; chart 3 shows that it’s not so good, as the reading plumbs depths not seen since the pandemic.
Inflation expectations may also catch some attention but it’s only for the year-ahead. The May reading sat at 6.2% y/y 12-months hence for a third straight month. Let’s see if lower gas prices have an influence.
US repeat sales home prices during April will probably keep falling (9amET). The m/m seasonally adjusted declines were suspended over the July to January period but resumed in February and March. The y/y rate of 0.9% in nominal terms continues to indicate that real house prices are in freefall. It’s a mystery why some folks still talk of wealth effects on consumers outside of the upper income cohorts that own most of the equities, as the middle- and lower-income brackets are in a much less enviable position with falling real house prices and little exposure to equities.
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