Monetary policy announcements lead the week’s data releases with rate decisions from the Bank of England, European Central Bank and Bank of Japan due on Thursday.
A range of activity indicators are also available this week with August Purchasing Managers’ Index data for UK manufacturing and services out on Monday and Wednesday and their US equivalents, the ISM’s, out tomorrow and Thursday respectively. Major US labour market measures are released later in the week with August non-farm payrolls out on Friday. Official data on German industrial activity for July are also out on Thursday and Friday.
Little action is expected from the BoE on Thursday. We know two members of the Monetary Policy Committee voted to raise rates at last month’s meeting, but lower than expected inflation and the weak wage growth since then are unlikely to push the MPC consensus to raise rates in September.
Analysts at Investec note the impact of next May’s UK general election on a rate rise and that historically rates remain fixed in periods close to polling days. Investec expects the rise to come as early as November this year given “the clear recovery in the economy and improving credit availability”.
Of greater consequence will be the ECB announcement following shortly after the BoE’s. News last week that euro area inflation fell to an expected five-year low of 0.3 per cent, combined with Mario Draghi’s comments at Jackson Hole have led analysts to expect the tone of this month’s meeting to be overly dovish.
Despite deflation fears no actual policy change is expected this month, but affirmation of the ECB’s commitment to price stability is, which will further open the door to the use of extraordinary measures such as asset purchases in the near future. Analysts at HSBC expect to see purchases of asset backed securities towards the end of this year with outright bond buying beginning sometime in early 2015.
Policy makers at the BoJ are expected to maintain their wait-and-see stance; inflation is holding firm and any policy change before the end of the year is very unlikely.
US labour market data, released on Friday, are expected to show further gains in US employment. The consensus expects the US economy added 220,000 jobs in August up from 209,000 in July; a fall in the unemployment rate to 6.1 per cent is expected to coincide.
UK PMI’s are expected to show a slight weakening in manufacturing activity for August. The consensus expects a reading of 55.1, down from 55.4 in July, still indicating expansion in the sector as the UK economy outperforms its global peers. The UK services sector hit a new PMI high for 2014 in July of 59.1; a slight softening from this is expected in August with a consensus reading of 58.5.
US manufacturing as indicated by the ISM survey is also expected to soften in August to 56.8, down from 57.1 in July, but still well above the 50 level that indicates expansion in the sector. The non-manufacturing ISM hit the highest level since December 2005 last month with a reading of 58.7; again a slight softening is expected for August with a reading of 57.4.
German factory orders for July, released on Thursday, are expected to rebound from two successive months of decline, the consensus expecting a 1.4 per cent increase after falling 3.2 per cent in June. Industrial output figures for Germany, out on Friday, are expected to show a modest gain on 0.5 per cent on June.
Rate decisions from the Bank of Canada and the Swedish Riksbank are also announced on Wednesday and Thursday respectively.