Welcome back to “The Week Ahead,” your trusted source for insights into the ever-evolving economic landscape. As we navigate the intricate web of financial forecasts and data releases, it’s crucial to stay informed and anticipate the shifts that could redefine the trajectory of the US economy. Here’s a comprehensive look at the economic announcements that are set to shape the coming week.
The revised economic outlook paints a promising picture. Contrary to previous forecasts of a mild recession in the first half of 2024, the US economy is now poised for a soft landing. This optimistic shift is underpinned by recent data that highlights diminishing price pressures amidst a backdrop of robust growth and impressively low unemployment rates. Moreover, the anticipated rate cuts for 2024 and 2025 have been adjusted to 75bp and 100bp, respectively, marking a significant departure from market expectations.
Growth remains a focal point of economic discussions. The US GDP is on track to grow by 2.0% this year, followed by a 0.7% increase in 2024 and a 1.8% uptick in 2025. These projections surpass previous assumptions by 0.5pp for 2023 and 0.7pp for 2024, signaling a resilient economy that continues to defy expectations.
Inflation, often the elephant in the room, is also set for a notable trajectory. The PCE inflation rate is projected to descend to a comfortable 2.0% year-on-year by the latter half of 2025. This adjustment represents a delay of approximately two quarters from the previous baseline. Furthermore, the core PCE inflation is anticipated to undergo changes of 3.5% in 2023, 2.8% in 2024, and 2.2% in 2025.
The Federal Reserve’s stance remains a topic of keen interest. Market analysts are gearing up for a potential 25bp rate hike in September, targeting a range of 5.50-5.75%. However, whispers in financial circles suggest a possible postponement to November. The subsequent rate cut is now earmarked for June 2024, with a series of quarterly 25bp reductions leading to cumulative rate cuts of 75bp in 2024 and 100bp in 2025.
Reflecting on the past week, several data releases stood out. The ISM index, productivity figures, and factory orders provided valuable insights. Key figures that caught the market’s attention included the Chicago Purchasing Managers at 42.8, the S&P Global US manufacturing PMI at 49.0, and the ISM Manufacturing at 46.4.
As we gear up for the week ahead, all eyes will be on the Consumer Price Index (CPI) and the Producer Price Index (PPI). Additionally, the Trade Balance for June, estimated at a deficit of -$64.6 billion, will be another significant data point to watch.
Stay tuned to “The Week Ahead” as we continue to dissect, analyze, and present the economic narratives that matter. Your financial foresight starts here.
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Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Week’s Numbers
Review Last week’s numbers here.
Earnings
- 23Q2 Y/Y earnings are expected to be -4.2%. Excluding the energy sector, the Y/Y earnings estimate is 2.0%.
- Of the 422 companies in the S&P 500 that have reported earnings to date for 23Q2, 79.1% have reported earnings above analyst estimates. This compares to a long-term average of 66.4% and prior four quarter average of 73.4%.
- During the week of August. 7, 33 S&P 500 companies are expected to report quarterly earnings
For 23Q2, S&P 500’s year-over-year earnings are projected to decline by 4.2%. However, when excluding the energy sector, this forecast improves significantly to a growth of 2.0%. Of the S&P 500 companies that have disclosed their earnings for the quarter, an impressive 79.1% surpassed analyst predictions. This figure exceeds the long-term average of 66.4% and is higher than the average of 73.4% over the past four quarters. Looking ahead, 33 S&P 500 firms are slated to announce their quarterly earnings in the week starting August 7.
Source I/B/E/S data from Refinitiv
Global Spotlight
Jeddah Summit Explores Ukraine’s 10-Point Peace Plan
High-level representatives from approximately 30 nations are convening in Jeddah, Saudi Arabia to discuss Kyiv’s proposed 10-point peace plan. Originating from talks initiated in June in Copenhagen, the meeting intends to bring cohesion to Western and Global South views regarding potential negotiations. While focusing on Ukraine’s territorial integrity, the plan also highlights concerns like food exports, energy security, and nuclear safety. Notably absent is Russia, with the meeting aiming to diplomatically underscore Moscow’s divergence with key allies, including India, China, and Brazil.
Brazil Spearheads First-Ever Amazon Policy Summit
Brazil’s President Luiz Inacio Lula da Silva is chairing a summit to establish a unified policy for countries within the Amazon rainforest. The meeting will see representatives from nations such as Bolivia, Colombia, and Peru among others. Expected outcomes include the creation of an anti-deforestation fund and strategies for cross-border reforestation. This fund is poised to be a tool for these nations to request financing from Western countries in the upcoming COP28 in Dubai.
Pakistan Eyes Early Parliamentary Dissolution
Pakistan’s Prime Minister Shehbaz Sharif has unveiled plans to disband the lower house of Parliament, potentially leading to a caretaker government ahead of the autumn elections. This early dissolution, scheduled for Aug. 9, would necessitate elections within 90 days as per Pakistan’s Constitution. However, recent legislative amendments strengthening caretaker governments have raised concerns among opposition members regarding the potential influence of the interim government on upcoming elections.
ECOWAS Sets Ultimatum for Niger’s Political Reinstatement
The Economic Community of West African States (ECOWAS) has mandated the new military regime in Niger to reinstate President Mohamed Bazoum by Aug. 6, threatening possible military action. With the junta’s recent engagements with the Russian paramilitary Wagner Group and the termination of French security pacts, ECOWAS’ demands seem less likely to be met. While countries like Nigeria and Senegal have offered troop support if ECOWAS resorts to military intervention, the unpredictability of Niger’s military response leaves the regional bloc’s next move uncertain.
Stratfor.com
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