On Monday 1st: Chinese Caixin Manufacturing PMI, Japanese Consumer Confidence, German Inflation Rate YoY Prel and American ISM Manufacturing PMI
On Tuesday 2nd: Australian RBA Meeting Minutes, European Inflation Rate YoY Flash, American Fed Chair Powell Speech, American JOLTs Job Openings and Japanese Tankan Large Manufacturers Index
On Wednesday 3rd: Canadian Balance of Trade, American ISM Services PMI and American FOMC Minutes
On Thursday 4th: Australian Balance of Trade and UK General Election
On Friday 5th: Canadian Unemployment Rate, American Non Farm Payrolls, American Unemployment Rate and Canadian Ivey PMI
Monday 1st of July
China's manufacturing sector continued to expand in May 2024, marking the seventh consecutive month of growth. The Caixin China General Manufacturing PMI rose to 51.7, the highest level since June 2022. This positive momentum was fueled by a surge in output, growing at its fastest pace in 23 months. The rise in production stemmed from an increase in new orders, although the expansion in new export orders was significantly slower than April's 41-month high. This suggests a potential dampening effect from a sluggish global economy.
However, employment levels continued to decline for the ninth consecutive month, highlighting ongoing challenges in the labour market. Despite this, backlogs of work increased for the third month in a row, and at the fastest pace since September 2021. This indicates a growing backlog as new work continues to flow in. Additionally, purchasing activity climbed to its highest level in three years, reflecting strong demand for raw materials.
Input cost inflation accelerated to its fastest pace since October 2023,driven by rising costs of metals, plastics, and energy. As a result, manufacturers passed on some of these increased costs to their clients, leading to higher output prices.
Despite these challenges, business sentiment strengthened in May, fueled by optimism about an improvement in both domestic and global demand. For June, market participants’ forecasts predict a decline in the Caixin Manufacturing PMI to 51.2 when the data is released at 1:45 AM GMT, which suggests they believe the recent strong growth might moderate slightly in the coming month.
Consumer confidence in Japan took a significant hit in May 2024, plunging to 36.2. This marks a drop from 38.3 in April and falls short of market expectations of 38.9. It's the lowest level recorded since November 2023, reflecting a widespread deterioration in household sentiment.
This decline permeated all aspects of the consumer confidence index. Japanese households expressed pessimism regarding future income growth, employment prospects, willingness to purchase durable goods, and their overall livelihood.
Looking ahead, market participants aren't expecting much improvement. They forecast a further dip in consumer confidence to 36 when the data is released at 5:00 AM GMT in June, which could mean that the current negative sentiment might persist in the near future.
The annual inflation rate held steady at 2.4% in May, following two consecutive months at a three-year low of 2.2%. The uptick in inflation stemmed primarily from increased costs for services and food. However, there was some relief on the goods side, where price growth moderated. Energy prices continued their decline, further contributing to the overall slowdown in inflation.
Core inflation, which excludes volatile components like food and energy, remained at 3% in May, which suggests that underlying inflationary pressures are still present but haven't intensified.
Despite the recent pause in the decline, market participants anticipate a further decrease in the German inflation for June. When the data is released at 12:00 PM GMT, market participants predict a drop to 2.3%.
The US manufacturing sector dipped back into contraction territory in May 2024, defying expectations of continued improvement. The Institute for Supply Management (ISM) Manufacturing PMI slipped to 48.7 from 49.2 in April, falling short of market forecasts of 49.6.
This reading indicates a slowdown in manufacturing activity for the second consecutive month. Demand remained subdued, with new orders declining. Production levels also stagnated, suggesting a lack of momentum in the sector. Additionally, inventories and backlogs of orders both decreased, further highlighting the weakened demand environment.
However, employment levels in the manufacturing sector saw a rebound in May, offering a welcome sign for the workforce. Prices also showed signs of moderation, with the rate of increase slowing down.
When the data is released at 2:00 PM GMT, market participants predict a rise in the ISM Manufacturing PMI to 51, returning to expansion in May.
Tuesday 2nd of July
The Reserve Bank of Australia (RBA) opted to hold its cash rate steady at 4.35% during their June meeting. This marks the fifth consecutive meeting where interest rates have remained unchanged, following the last increase in November 2023. The upcoming release of the RBA Meeting Minutes at 1:30 AM GMT will be closely scrutinised by market participants for any clues regarding the Bank's future monetary policy decisions. These minutes will detail the discussions and considerations that led to the decision to hold rates, potentially offering valuable insights into the RBA's assessment of the Australian economy and its future trajectory for interest rates.
Eurozone inflation ticked upwards in May 2024, reaching 2.6% annually. This marks a slight increase from the previous two months, which held steady at 2.4%. The rise was driven by a rebound in energy prices and a faster pace of price increases within the services sector. However, there was some moderation in price growth for food, alcohol, tobacco, and non-energy industrial goods.
The services sector played the most significant role in pushing inflation higher. This suggests that underlying price pressures within the Eurozone economy might be strengthening. Additionally, the core inflation rate, which excludes volatile items like food and energy, also rose to 2.9% from 2.7%, further reinforcing concerns about inflation becoming more entrenched.
The European Central Bank (ECB) recently adjusted its inflation forecasts upwards. They now project headline inflation to average 2.5% in 2024, 2.2% in 2025, and 1.9% in 2026. This revision reflects the recent uptick in inflation and suggests the ECB might need to take a more active stance to curb price pressures in the future.
Despite the recent increase, market participants are anticipating a slight dip in inflation for June when the data is released at 9:00 AM GMT. They predict a decrease to 2.4%.
The US job market showed signs of cooling down in April 2024. The number of job openings, a key indicator of labour demand, fell by a significant 296,000 from the previous month. This decline brought the total job openings down to 8.059 million, the lowest level since February 2021.
The decrease in job openings suggests a potential slowdown in hiring activity. This could be due to various factors, such as companies becoming more cautious in their hiring plans amidst economic uncertainties or having already filled many of their open positions.
Financial markets and analysts will be closely watching the release of the May JOLTs Job Openings data scheduled for 2:00 PM GMT. This data will provide further insights into the current state of the US labour market and its direction in the coming months.
The Bank of Japan's latest Tankan survey dipped to 11 in the first quarter of 2024, down from 13 in the previous quarter. This marks the first decline in a year and is likely attributable to recent car plant shutdowns that disrupted production. However, the reading surpassed market expectations of 10, suggesting some underlying resilience in the manufacturing sector.
Large manufacturers also expressed concerns about the future, with their outlook for business conditions in the second quarter dipping to 10. Market participants also anticipate a further decrease in the Tankan Large Manufacturers Index for the second quarter, with forecasts predicting a reading of 10 when the data is released at 11:50 PM GMT.
Wednesday 3rd of July
Canada's trade deficit narrowed significantly in April 2024, offering a positive sign for the country's external trade position. The deficit came in at CAD 1.05 billion, nearly halving compared to the CAD 2 billion gap recorded in March. This positive development also surpassed market expectations, which had predicted a deficit of CAD 1.4 billion.
Analysts will be following the release of the May trade balance data scheduled for 12:30 PM GMT with keen interest. This upcoming data point will provide further insights into the recent trends in Canada's trade activity and its overall economic health.
The US services sector rebounded strongly in May 2024, defying expectations of continued sluggishness. The Institute for Supply Management (ISM) Services PMI surged to 53.8, marking the highest level in nine months and significantly exceeding market forecasts of 50.8. This positive reading signals a reversal from the first contraction in services activity observed since December 2022.
Businesses reported an increase in activity, suggesting a return to expansion after a brief period of decline. New orders also grew at a faster pace, indicating a rise in customer demand. Additionally, supplier deliveries slowed down, suggesting an easing of supply chain constraints that had previously hampered businesses. This improvement likely contributed to faster growth in new export orders as well.
However, employment continued to decline in the services sector, raising concerns about the job market. Inventory levels also rose, although at a slower pace. This suggests that businesses might be cautious about future demand despite the recent uptick.
On the price front, there were signs of relief. Inflationary pressures eased in the services sector, with a slowdown in price growth. This could be a welcome development for both businesses and consumers.
Despite the strong rebound in May, market participants predict a decline in the ISM Services PMI to 51 released at 2:00 PM GMT. This suggests they believe the recent growth might moderate in the coming month, but the overall outlook for the services sector remains positive.
The Federal Reserve opted to maintain interest rates at their current range of 5.25% to 5.5% during their June meeting.This marked the seventh consecutive meeting where rates remained unchanged, aligning with market expectations. This decision reflects the Fed's cautious approach towards inflation. Policymakers emphasised the need for further evidence that inflation is on a clear downward trajectory before considering any rate cuts.
The economic projections released by the Fed, known as the "dot plot," also revealed a shift in their outlook. In March,policymakers anticipated three rate cuts in 2024 and three in 2025. However, the June dot plot indicated a more conservative stance, with only one rate cut foreseen for the remainder of 2024 and four reductions expected in 2025. This revision suggests the Fed is prioritising inflation control and may be prepared to keep rates higher for a longer period.
Traders will be closely monitoring the release of the FOMC Minutes at 6:00 PM GMT.
Thursday 4th of July
Australia's trade performance in April 2024 painted a brighter picture than expected. The trade surplus on goods widened to AUD 6.55 billion, exceeding market forecasts of AUD 5.40 billion. This improvement came after a revision of the previous month's data, which showed a smaller surplus of AUD 4.84 billion.
The key driver behind the widening surplus was the relative resilience of exports. While export shipments did decline slightly, the decrease was less significant than the fall in imports. This suggests that Australian goods remained relatively competitive in the global market despite any broader economic headwinds.
Based on this positive development, market participants are anticipating a further increase in the trade surplus for May when the data is released at 1:30 AM GMT. They predict a surplus of AUD 6.7 billion.
Friday 5th of July
Canada's unemployment rate ticked upwards in May 2024, reaching 6.2%. This marks a slight increase from 6.1% in April and represents the highest level since October 2021. The rise aligns with market expectations, suggesting a potential pause in the recent trend of declining unemployment.
The increase in joblessness was accompanied by a jump of 28,000 in the number of unemployed individuals, bringing the total to 1.365 million. It's worth noting that only a quarter of these individuals transitioned into employment during the month.
Market participants anticipate the unemployment rate to remain at 6.2% in June when the data is released at 12:30 PM GMT.
The US job market surprised economists in May 2024 with a robust rebound. The economy added a significant 272,000 jobs, marking the strongest showing in five months. This is a sharp improvement compared to the downwardly revised figure of 165,000 jobs added in April and significantly surpasses market expectations of 185,000.
The May jobs report is even more impressive when considering the broader context. It outpaces the average monthly gain of 232,000 jobs observed over the past year and surpasses the average of 246,000 jobs added in the first four months of 2024. This suggests a potential acceleration in job growth.
Market participants forecast 160,000 new jobs to be created when the data is released at 12:30 PM GMT.
The US unemployment rate climbed to 4% in May 2024, snapping a 27-month streak of staying below that level. This marks the highest unemployment rate since January 2022 and caught markets off guard, as most analysts predicted the rate to hold steady.
Despite the uptick, the unemployment rate remains relatively low by historical standards. However, this increase does signal a potential shift in the labour market. Market participants expect the unemployment rate to hold at 4% in June. when the data is released at 12:30 PM.
Canada's economic growth showed signs of moderation in May 2024. The Ivey Purchasing Managers Index (PMI) dipped to 52, marking a significant decline from the two-year high of 63 recorded in April. This reading, although lower than expected by market forecasts of 65, still indicates a tenth consecutive month of expansion in Canadian economic activity.
However, the pace of growth seems to be slowing down. This is likely due to a decline in the inventories index,suggesting businesses might be cautious about restocking amidst some economic uncertainties. Despite this, the employment index remained steady at a strong level, highlighting continued job creation.
On the other hand, price pressures intensified in May. The Ivey PMI showed prices accelerating to a five-month high, potentially indicating rising input costs for businesses.
However, there was a positive development on the supply chain front. The supplier deliveries index went down, suggesting an easing of supply chain constraints that had previously hampered businesses.
Market participants forecast an increase in the Ivey PMI to 53.4 when the data is released at 2:00 PM GMT.
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