The week ahead 09 September 2024 - Concerns grow on the US economy
What to watch out for in the UK economy and property market this week.
Last week saw some mixed news on the state of the global economy. The final figures for the August PMI data showed an upwards revision for the UK, from 53.4 in the early draft to 53.8, but a small downwards adjustment for the Euro Area, from 51.2 to 51.0. The Eurozone figures were supported by growth in Italy and France, which compensated for weakness in Germany. The convention of the PMI is a reading below 50 points to falling output, and Germany stood at 48.4 in August, down from 49.1 in July. However, the financial markets were mainly focussed on news from the US, where there was a marked fall in the number of job openings, from 7.9 million in June to 7.7 million in July. Wall Street had been forecasting an increase to 8.1 million. This sparked a sell off for US equities, although the news has strengthened the case for the US Federal Reserve to cut interest rates later this month.
The Bank of Canada last week cut its policy rate by another 25 bps to 4.25%, its third reduction this year. In the next two weeks, the economic news will be dominated by upcoming interest rate decisions – from the ECB this Thursday, then the Fed on 18th September and the Bank of England on the 19th. Given the subdued situation in Germany, a 25 bps cut from the ECB is widely expected, and the Fed is likely to follow suit next week, thanks to the recent deceleration seen in the US core inflation figures. The Bank of England decision is harder to call, as clearly the global trend for interest rates is downwards, although the pound has strengthened against the US dollar lately which is deflationary, so that could grant a breathing space for rate setters to review more data before acting.
Other statistical releases this week include pay growth and GDP figures for the UK. Several indicators are pointing to a slowdown in the labour market, which should cause pay growth to slow. After a disappointing June figure, we see GDP growth picking up in July, consist with recent evidence the economy is strengthening.
Things to watch for this week
Tuesday, 10th September
UK Pay Growth (ex bonus), y-on-y, July
Previous: 5.4%
Forecast: 5.0%
With the labour market now slowing in the face of high interest rates, we are predicting pay growth decelerated again in July.
Wednesday, 11th September
UK GDP Growth, m-on-m, July
Previous: 0.0%
Forecast: 0.2%
The economy flatlined in June due to disappointing figures for the retail sector. However, strong survey data and lower inflation persuades us to forecast a recovery in July.
Thursday, 12th September
ECB Interest Rate Decision, September
Previous: 4.25%
Forecast: 4.00%
The ECB is now under pressure to switch from reducing inflation to supporting growth. The consensus view is a cut of 25 bps will be announced at this meeting.
Friday, 13th September
Euro Area Industrial Production, m-on-m, July
Previous: -0.1%
Forecast: 0.1%
Based on survey evidence, we believe industrial production strengthened in July in much of the Euro Area, in part thanks to lower inflation; although there are clearly individual countries that are underperforming the wider bloc.
