The US economy is likely to remain in the spotlight for a second week as key data on employment and consumption expenditure is out, and a number of Fed officials are due to speak including Yellen herself. Data from Japan and China will also come into focus as markets watch for signs of a slowdown in the region’s two largest economies.
US personal spending and personal income is released along with the PCE price index on Monday. Personal consumption expenditure, a key driver of US growth, is expected to rise by 0.3% m/m in August, unchanged from July. The core PCE price index, which is the Fed’s preferred measure of inflation, is forecast to increase by 0.1% m/m in August, giving an annual increase of 1.3%. After picking up in the middle of 2014, the core PCE price index has eased in recent months, complicating the Fed’s forecasts on whether inflation can rise to its target level in the near term.
The key survey data for the US next week will be the Conference Board consumer confidence index (Tuesday) and the ISM manufacturing index (Thursday). At the end of the week, the all-important nonfarm payrolls are due but before then on Wednesday, the ADP employment change is expected to show a rise of 190k, unchanged from the previous month. Nonfarm payrolls are forecast to rise by 203k in September, up from 173k previously, while the unemployment rate is expected to stay unchanged at 5.1%. Average hourly earnings is expected to pick up to 2.4% y/y, adding to the argument that the tightening of the labor market is starting to put pressure on wages.
While speeches by several Fed officials next week will attract some attention, analysts will be more interested in Fed Chair Janet Yellen’s speech on Wednesday in St. Louis on any additional clues about the path of US rates. It follows her speech this week, where she reiterated the case of a rate hike at some point this year.
In Japan, the preliminary industrial production figures for August will be closely watched on Wednesday on any impact from the slowdown in China affecting Japanese manufacturers. Industrial production is forecast to rise by 1% m/m in August after declining by 0.8% in July. On Thursday, the Bank of Japan’s Tankan survey is expected to show a worsening outlook for the third quarter versus the second quarter. The official manufacturing PMI from China is also published on Thursday. September’s reading is estimated to have fallen slightly to 49.6 after dropping below 50 in August for the first time in six months.
Eurozone inflation will be the main data out of the euro area next week as the flash September estimates are published on Wednesday. Annual CPI is forecast to drop to 0% in September from 0.2% in August. This would be the lowest level since April and would add pressure on the European Central Bank to expand or extend its quantitative easing program if inflation drops back into negative territory in the coming months. The ECB has already hinted at more easing but only if growth and inflation outlook worsen significantly. German inflation out a day earlier is expected to show inflation slowing to 0.1% y/y.
Finally, in the UK, manufacturing PMI will be the main data of interest. Manufacturing PMI is forecast to ease slightly to 51.3 in September from 51.5. Recent PMI data for the UK have pointed to a slowdown in growth in the third quarter, although construction PMI out on Friday is forecast to pick up slightly in September. Final estimates of second quarter GDP growth is not expected to show any revision when released on Wednesday.