Busy week ahead in terms of economic events, though Monday starts off quietly with only the U.S. empire state manufacturing index on the calendar being notable.
On Tuesday, the U.K. will release the average earnings index 3m/y, the claimant count change, and the unemployment rate. Canada’s highlight will be inflation data, while the U.S. will publish retail sales m/m.
Wednesday brings U.K. inflation data, followed by the BoC monetary policy announcement and the highly anticipated FOMC meeting.
On Thursday, New Zealand will release GDP q/q, and Australia will publish its employment change and the unemployment rate figures. The BoE will hold its monetary policy meeting, while in the U.S. we’ll get unemployment claims and the Philly Fed manufacturing index.
Finally, Friday features the BoJ monetary policy announcement along with retail sales m/m data from the U.K. and Canada.
In the U.S., the consensus for retail sales m/m is 0.2% vs prior 0.5%, and for core retail sales m/m is 0.4% vs prior 0.3%.
The latest retail sales report highlights the resilience of U.S. consumers, with gains driven by stronger auto sales and steady demand for clothing, sporting goods, and online shopping. However, spending on home improvement and restaurants lagged, reflecting continued softness in housing and discretionary services.
For August, sales are expected to moderate, with headline growth slowing to 0.4% and sales excluding autos rising 0.5%. While consumers still have spending power, headwinds from weaker sentiment, sticky inflation expectations and a cooling labor market suggest the pace of consumption is likely to slow over the rest of the year, analysts from Wells Fargo said.
For the BoC meeting, analysts are divided on whether the Bank will deliver a rate cut. Markets lean toward another cut, but recent data suggest policymakers may hold steady.
Inflation figures, released the day before, will be crucial. Headline CPI is expected to rise from 1.7% to 2.1%, while core measures are likely to stay near 3%, the upper end of the BoC’s target.
Canada’s economy contracted 1.6% in Q2, almost exactly in line with BoC expectations, driven by weaker trade and a slowdown in manufacturing. Early Q3 indicators look more stable, with export volumes leveling off and July manufacturing sales up 1.8%. Job losses have been concentrated in trade-sensitive sectors, while the broader labor market has remained relatively steady.
The data leaves the door open for a rate cut, but sticky inflation and resilient household demand could persuade the BoC to keep rates on hold. However, if core inflation surprises to the downside, a cut this week becomes more likely.
At this week’s meeting, the Fed is expected to resume rate cuts, lowering the fed funds rate to a target range of 4.00%–4.25%. This would align with the March and June Summary of Economic Projections, which signaled easing this year despite firmer inflation expectations.
As a reminder, the Fed kept rates on hold at recent meetings, emphasizing that inflation remained elevated while labor market conditions were relatively stable. Inflation is still the sticking point with core PCE running about one percentage point above target and tariff-driven goods inflation offsetting softer services prices.
The Fed’s updated projections are likely to remain cautious on inflation but tilt more dovish on growth and employment. The September dot plot is expected to show 75 bps of cuts penciled in for 2025, up from 50 bps in June, with the longer-run rate outlook unchanged, according to Wells Fargo analysts.
Looking ahead, the Committee will likely stress that September’s cut is not the start of an automatic easing cycle, keeping policy decisions data-dependent.
In New Zealand, the consensus for GDP q/q is -0.3% vs prior 0.8%, although Westpac analysts forecast a 0.4% contraction. According to them, the decline is largely technical, driven by seasonal quirks in GDP calculation rather than a genuine downturn.
The seasonal effect is subtracting about 0.5 percentage points from the June-quarter growth, while typically adding a similar boost to December-quarter results.
Excluding that distortion, the picture looks more nuanced. Growth momentum has eased compared to the strong start of the year, with mixed signals across sectors pointing to a softer underlying trend.
For Australian employment, Westpac forecasts a 15k increase for August, softer than the market’s 22k expectation. July data confirmed that the labour market is slipping back into a gradual cooling phase, similar to what occurred a year ago.
Job growth over the past three months has slowed to 2% y/y. While still solid, the trend is weakening as the care economy eases from its earlier rapid pace, though weakness in the market sector appears to be stabilizing. A 15k gain this month would likely keep the employment-to-population ratio steady at around 64.2%, suggesting little change in overall labour market tightness despite slower hiring.
Australia’s unemployment rate held at 4.2% in July, following a temporary spike in June that Westpac analysts attribute largely to volatility in the youth labour segment. The rate continues to show a gradual upward drift from last year’s low of around 4.0%.
Participation remained steady at 67.0%, indicating the labour market is still relatively tight. Looking ahead, the unemployment rate is expected to edge up to 4.3% in August. Analysts are also closely monitoring underemployment, which shows signs of improvement even as the headline unemployment rate ticks higher.
At this week’s meeting, the BoE is expected to keep rates unchanged, consistent with its pattern of quarterly adjustments. Markets will focus on any hints about future policy, though forward guidance is likely to remain cautious, signaling that interest rates are edging closer to neutral.
Ahead of the meeting, labor market and inflation data will set the tone. The jobs market remains a key uncertainty. Payrolls will be watched for further signs of weakness, though recent surveys suggest the worst may have passed. Wage growth data will also be critical, with any slowdown likely to shape the Bank’s outlook.
Inflation is expected to show food prices rising above 5%, while services inflation may ease slightly. These prints are unlikely to alter the BoE’s expected rate-cut path, with a November reduction still favored unless there’s a major upside surprise, analysts at ING said.
The BoJ is widely expected to keep rates unchanged at 0.50% at this week’s meeting. The economic backdrop, characterized by tight labor markets, rising wages, and steady GDP growth, still argues for higher rates, but recent political developments are likely keeping policymakers cautious.
Prime Minister Ishiba’s resignation and the upcoming LDP leadership contest in early October have introduced a period of uncertainty that may weigh on BoJ decisions. As a result, the timeline for the next rate hike has been pushed back from October to early 2026. The future policy path could also hinge on whether the new leadership adopts more expansive fiscal measures.
Meanwhile, updated inflation data for August will be closely watched, especially for any upside surprises after three months of slowing price growth. For now, the BoJ is expected to remain on the sidelines, with rate hikes likely resuming in January 2026 and the policy rate rising toward 0.75%, Wells Fargo analysts said.
