Spotlight on September
The forthcoming data is likely to cement expectations for the Federal Reserve to raise interest rates again at the 26 September FOMC meeting. With the economy having expanded 4.1% in 2Q and this week’s inflation report set to show headline CPI ticking up to 3%, with core CPI (excl. food and energy) remaining at 2.3%, the case for higher interest rates is robust.
At the same time, the jobs market is going from strength to strength with payrolls set to rise by close to 200,000 yet again. Wages should also move higher and unemployment could drop back below 4%, which should help underpin consumer spending growth in the second half of the year.
Trade war impact on Germany may be revealed through industrial data
The entire batch of industrial data for June should not only shed some light on the possible impact from current trade tensions on the German economy but will also provide the last pieces of evidence for 2Q GDP growth, which is to be released on 14 August.
Scandi inflation in focus
Inflation figures for Norway and Sweden are due next week. We expect high energy prices, especially rising electricity costs due to the extremely hot summer weather which has depleted hydro power reservoirs, to keep headline inflation above 2% in both countries. But core inflation, which is more important to central bank policy, still looks subdued at 1.3% and 1.2% respectively.