Key events in developed markets and EMEA next week

The market remains split as to whether the Federal Reserve will hike rates by 50bp or 75bp on 21 September, but things may become clearer after the annual Jackson Hole policy symposium begins next Thursday which will see Fed officials and other global central bankers, finance ministers and academics converge in Wyoming. Fed chair Jerome Powell will give the keynote speech. However, even after this event it is all to play for with the August jobs report to be published on 2 September and the August inflation report on 13 September. We currently favour 50bp moves in September and November with a final 25bp hike in December, but should payrolls rise strongly yet again (350k+) and inflation move upwards, then we would likely switch to a 75bp hike on 21 September.

The data calendar includes revisions to 2Q GDP, which was initially reported as -0.9%. We suspect that consumer spending could be revised modestly higher following the revisions in the retail sales report so are tentatively suggesting -0.8%. We will also get July consumer spending numbers, which should be OK with lower gasoline prices boosting household spending power, supporting consumption elsewhere. Durable goods should also hold up, buoyed by robust Boeing aircraft order numbers.

Next week Tuesday will give a sense of where the eurozone economy is headed in August as both PMI and consumer confidence data will be out. The PMIs will be especially closely watched as the composite PMI dipped below 50 in July, indicating a contraction in economic activity. We expect a further deterioration for August as businesses and consumers struggle with even higher energy prices, and drought is adding to production problems in Germany. This will also impact consumer confidence, which had already dropped to an all-time low in July. Don’t rule out another new record for August.