On Monday, the economic calendar is relatively easy. In Canada, BoC Governor Macklem will deliver a speech titled “Workers, Jobs, Growth and Inflation – Today and Tomorrow” at the Winnipeg Chamber of Commerce.
Tuesday brings inflation data for Canada, as well as CB consumer confidence and the Richmond manufacturing index for the US
On Wednesday, attention will focus on Australian inflation data and US new home sales
Thursday features BoE Governor Bailey’s London press conference on the Financial Stability Report for the UK.
On Friday, Japan will release Tokyo’s YoY core CPI, while in the US we’ll get core PCE price index m/m, personal income m/m, personal spending m/m, revised consumer sentiment of UoM and revised UoM inflation expectations.
Canadian inflation data this week is widely expected to gauge whether there is continued progress. Expectations for annual data suggest a further slowdown to 2.6%, while consensus on average core measures is also likely to fall to around 2.7%.
As a reminder, BC recently gave a rate cut of 25 bps and if inflation proves to be on track towards the Bank’s 2% target, additional rate cuts are expected. At the last meeting, the BC noted that there are plenty of signs that inflation is falling.
The market now anticipates further rate cuts in July, September and October. On the other hand, if inflation surprises on the rise, it is possible that the Bank will skip one of the expected cuts.
In Australia, inflation has been more resilient, falling more slowly than in other countries. For this week’s data, the annual CPI is expected to increase from 3.6% to 3.8%. However, analysts from Citi stressed that the focus should be on the components of the price increase and not on total inflation as a whole. One aspect to monitor will be the broader categories of services inflation, which are usually measured in the second month of the quarter. The outlook is not very optimistic and the RBA still has more work to do.
Tokyo’s core y/y CPI (excluding fresh food) is expected to rise from 1.9% to 2.0%. Analysts from Citi argue that this increase comes as a result of the halving of government subsidies for the price of electricity and gas. They emphasized that this trend will also be reflected in the July data when the subsidies will be stopped.
Consensus for the core US PCE price index m/m is 0.2% vs. 0.2% previously. Personal income m/m is expected to increase by 0.4% vs. 0.3% previously and personal expenses m/m is expected to increase by 0.3% vs. 0.2%.
According to Wells Fargo, there are indications that previously resilient consumer spending is beginning to soften, as evidenced by weaker May retail sales data and downward revisions to previous months. However, it will still see marginal growth due to lower prices, strong hiring and wage increases.
Given May’s soft CPI and PPI, the PCE deflator — the Fed’s preferred gauge of inflation — is expected to rise by just 0.1%, leading to an annual rate of 2.6%. That would be a positive step in the fight against inflation, but the Fed will likely wait for more progress before cutting rates.
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