Global markets struggled last week amid growing signs of an upcoming recession. Germany’s economy contracted and is entering the recession phase in all probability. China’s industrial production grew at the slowest pace ever since 2002. The U.S. yields have inverted. This has scared investors into believing that the world´s largest economy is faced with a recession. Other economic data were mixed. The US retail sales rose more than expected, but consumer confidence fell.
The markets are now looking forward to the Federal Reserve’s next move. The FOMC meeting minutes and Fed Chair Jerome Powell´s speech stand out among the key data scheduled for release in the upcoming week. Here is an outlook of some of the important releases in the next week:
#1: Australia RBA Monetary Policy Meeting Minutes (08/20/2019 Tuesday 01:30 GMT)
The Reserve Bank of Australia releases the Monetary Policy Meeting Minutes eleven times in a year, two weeks after the announcement of the Cash Rate. It provides a detailed account of the most recent meeting of the Reserve Bank Board and in-depth insights into the economic conditions that impacted their decision as regards setting interest rates.
#2: Canada CPI (08/21/2019 Wednesday 12:30 GMT)
In Canada, the Consumer Price Index declined by 0.20 percent in the month of June form the previous month.
Forecast for July 2019: Consumer prices are expected to increase by 0.1 percent
#3: U.S. FOMC Meeting Minutes (08/21/2019 Wednesday 18:00 GMT)
The U.S. FOMC releases the minutes of the meeting held for deciding the interest rates eight times in a year, three weeks after the announcement of the Federal Funds Rate. It provides a detailed account of the most recent meeting of the FOMC and in-depth insights into the financial and economic conditions that impacted the members’ decision on setting interest rates.
#4: U.S. Jackson Hole Symposium (08/22/2019 and 08/23/2019)
The Economic Policy Symposium, held annually by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, is attended by finance ministers, central bankers, academics, and participants of financial markets around the world. The meetings are not open to the press. However, officials usually talk to the reporters throughout the day. Speeches and comments made by central bankers as well as other influential officials often create significant volatility in the financial markets.
#5: France Flash Services PMI (08/22/2019 Thursday 07:15 GMT)
In France, the IHS Markit Services PMI declined to the 52.6 level in July from the 52.9 level in the prior month. However, the reading came in above the preliminary estimate of 52.2. New business increased for the fourth consecutive month at a solid pace although it was slightly weaker compared to the seven-month high hit in June. The job creation rate was also solid. It has quickened for the fourth consecutive month and has seen the sharpest increase since October last year. The input price inflation rose from June’s 22-month low on higher fuel, transport, and storage prices. Though output price inflation also quickened, the increase remained modest. Confidence as regards the 12-month business activity outlook recovered from the 31-month low in June.
Forecast for August 2019: 52.5
#6: Germany Flash Manufacturing PMI (08/22/2019 Thursday 07:30 GMT)
In Germany, the IHS/BME Manufacturing PMI was revised upward to the 43.2 level in July from the preliminary estimate of 43.1. The latest reading also indicated the steepest fall in overall manufacturing conditions ever since mid-2012. New export orders plunged the most ever since April 2009 in the midst of fall in sales to China and a deceleration in the automotive sector. The output decline rate was at the second-quickest level ever since July 2012. Workforce numbers dropped to the largest extent in seven years and the buying levels shrank the most in more than a decade. Input costs dropped at the fastest rate since April 2016 and output prices declined for the first time ever since August 2016. Finally, the future expectations of manufacturers fell to the most negative level since late 2012.
Forecast for August 2019: 43.1
#7: Germany Flash Services PMI (08/22/2019 Thursday 07:30 GMT)
In Germany, the IHS Markit Services PMI was revised downward to the 54.5 level in July from the preliminary estimate of 55.4. The reading for July dropped from June’s nine-month high level of 55.8 but indicated a marked rate of overall growth. New order receipts rose by the least level ever since February as the stronger domestic demand offset a sustained new business downturn from abroad. Employment growth eased from the 11-and-a-half-year high in April to the weakest level since January. Additionally, the quantum of outstanding business across the service sector remained unchanged after five consecutive months of gain. Input cost inflation was comfortably above the historical average because of higher fuel prices, wages, and rents. Business sentiment hit the lowest level ever since December 2014 amid concerns related to the health of the car industry and economic growth outlook.
#8: New Zealand Retail Sales (08/22/2019 Thursday 22:45 GMT)
In New Zealand, retail trade increased 0.7 percent on a quarter-on-quarter basis in the first quarter of this year, down from the 1.7 percent increase in the prior period. Analysts had expected retail trade to increase by 0.6 percent. Sales increased at a slower rate for supermarkets and grocery stores and clothing, footwear, and accessories stores. Fuel sales also increased. However, sales declined at pharmaceutical and other stores; accommodation services; and food and beverage services (-0.3 percent vs 4.4 percent).
Forecast for the June quarter of 2019: Retail trade is expected to increase by 0.1 percent
#9: Canada Core Retail Sales (08/23/2019 Friday 12:30 GMT)
In Canada, core retail sales, which exclude sales of autos, declined 0.30 percent in May from the 0.10 percent increase in April.
Forecast for June 2019: Core retail trade is expected to drop by 0.1 percent
#10: U.S. Fed Chair Powell Speaks (08/23/2019 Friday 14:00 GMT)
Jerome Powell, Fed Chair, is scheduled to deliver a speech on the topic “Challenges for Monetary Policy” in Wyoming at the Jackson Hole Economic Policy Symposium. The FOMC minutes may be dismissed as stale news, but this all-important speech is likely to draw attention.
The question that the investors want to be answered will be whether the Fed would cut interest rates in September. In July, Powell reiterated that the interest rate reduction is just an “insurance measure” and that it is not the beginning of the reduction cycle. However, the global markets have been struggling for a long time now and the yield curve is indicating a recession. Other countries have also reported economic weakness. The greenback might suffer if Powell hints at an interest rate cut in September. The USD will gain if he dismisses the possibility of a rate cut. However, Powell is not likely to be very explicit about this.