Monday starts quietly, with only remarks from some FOMC members on the agenda. On Tuesday, focus will be on flash manufacturing and services PMIs from Australia, the eurozone, the U.K., and the U.S.
In addition, Fed Chair Powell is scheduled to deliver remarks on the economic outlook at the Greater Providence Chamber of Commerce Economic Outlook Luncheon in Rhode Island. Audience questions are expected, though no major policy signals are anticipated.
On Wednesday, attention will shift to Australia’s inflation data, while Japan will release the BoJ core CPI y/y. Thursday brings the SNB monetary policy announcement, along with a heavy U.S. calendar including final GDP q/q, weekly jobless claims, durable goods orders m/m, and existing home sales.
On Friday, Japan will publish Tokyo core CPI y/y, Canada will release GDP m/m, and the U.S. will report the core PCE price index m/m, personal income m/m, personal spending m/m, along with the revised University of Michigan consumer sentiment and inflation expectations.
Throughout the week, numerous FOMC members are scheduled to deliver remarks on the risks to the economy and the Fed's plan to deliver two more 25bps rate cuts this year.
Traders will be closely watching this week’s eurozone PMI data to gauge whether the economy is truly benefiting from the summer burst of optimism or slipping back into sluggish growth.
August’s PMI readings were strong, particularly in manufacturing, but ING analysts caution that this may not tell the full story. The European Commission’s own survey pointed to a more temporary rebound, with underlying expectations for the sector still subdued.
In Australia, the consensus for CPI y/y is 2.9% vs prior 2.8%. July inflation surprised to the upside at 2.8%, above the 2.7% market forecast. In the month, prices rose 0.9%, driven mainly by electricity, new dwellings, and holiday travel.
Electricity costs increased due to timing quirks in rebates and annual price reviews. While this spike should unwind in August as rebates take effect in NSW and ACT, broader energy costs remain a source of uncertainty.
Housing inflation also picked up, with new dwelling prices up 0.4% as builders reduced discounts. Westpac expects a return to the 0.2% monthly trend in August, though margin rebuilding could keep upward pressure intact.
Recreation prices also surprised to the upside, led by a sharp rise in domestic holiday travel, but this is likely to partially reverse in August as seasonal effects weigh.
Westpac projects August CPI to rise just 0.1% m/m, though base effects will likely lift the annual pace to 3.1%. Risks tilt to the upside, particularly if homebuilders continue restoring margins and firming prices.
At this week’s meeting, the SNB is widely expected to keep monetary policy unchanged. Recent inflation data in Switzerland came broadly in line with expectations. While monthly inflation dipped –0.1%, similar pullbacks in recent months have not raised significant concerns with Chairman Martin Schlegel saying that the bar is high for a return to negative rates, though not excluding the possibility.
In the U.S., the consensus for new home sales is 651K vs prior 652K, and for existing home sales 3.96M vs prior 4.01M. The housing market remains sluggish, with sales activity hovering near historic lows amid high borrowing costs and a cooling labor market that weighs on demand.
Existing home sales rose 2% in July but remain barely above year-ago levels, while new home sales slipped 0.6% on the month and are running more than 8% below last year. Builders’ use of incentives such as discounts and mortgage rate buy-downs is proving less effective in attracting buyers.
Mortgage rates have eased to 6.26%, an 11-month low, but this is unlikely to trigger a quick rebound. Elevated borrowing costs continue to pressure existing sales, while new home contracts in August faced average rates around 6.6% alongside growing unemployment concerns. Forecasts point to another modest decline ahead, with new home sales expected to dip 0.6% to a 648K annual pace and existing sales seen down 1.5% to 3.95M, according to Wells Fargo analysts.
In the U.S., the consensus for core durable goods orders m/m is –0.2% vs prior 1.0%, and for durable goods orders –0.4% vs prior –2.8%. This indicates that the manufacturing sector remains under pressure.
While durable goods orders and overall production have improved this year, growth is concentrated in a few industries rather than broad-based. Business sentiment is still weak, with many firms reluctant to commit to new capital projects amid policy uncertainty. The clearest strength continues to come from high-tech areas such as software and computers, where investment has proven more resilient.
Wells Fargo takes a more optimistic view. They expect overall new orders for durables to rise 0.6% in August, with much of the gain driven by transportation. Boeing’s order flow points to a rebound in nondefense aircraft, while auto orders may have ticked higher as well. Excluding transportation, however, they also expect new orders to slip by 0.2%.
Shipments data will also be in focus as a key gauge of Q3 business investment. After a July jump boosted by aircraft some giveback is likely in August. Still, core nondefense capital goods shipments are expected to hold steady, signaling a reasonable pace of equipment investment this quarter.
In Japan, the consensus for Tokyo core CPI y/y is 2.8% vs prior 2.5%. Governor Ueda emphasized that the data will be closely monitored to gauge the impact of U.S. tariffs, though so far he believes Japan’s economy is absorbing the pressures. Rising food prices have been a key driver for inflation but are expected to ease over time.
While core inflation remains below 2%, it is gradually edging higher, and the BoJ is watching household inflation expectations closely. Ueda downplayed the recent dip in short-term expectations, but acknowledged that elevated prices can weigh on households, underscoring the need for caution. Overall, the latest figures remain broadly consistent with the BoJ’s outlook.
One of this week’s key data releases will be the core PCE deflator, the Fed’s preferred inflation gauge. The consensus for the core PCE price index m/m is 0.2% vs prior 0.3%; for personal income m/m is 0.3% vs prior 0.4%; and for personal spending m/m is 0.5% vs prior 0.5%.
While core CPI came in hotter at 0.3% m/m, the core PCE is expected to rise a cooler 0.2% m/m and 2.9% y/y, reflecting its lower housing weight and softer inputs from categories like airfares and healthcare. A print in line with expectations would reinforce the case for further Fed rate cuts in October and December.
