In developed markets, UK data has a big week ahead with growth expected to come in as another headache for the Bank of England. We also advise watching Swedish house price data, which could give an insight into the uncertainty surrounding their economic outlook
There are three things to watch in the UK in the coming week. First up, it’s the jobs report where we expect wage growth (ex-bonuses) and jobs growth to slip back further – although both are mainly a function of base effects. Pay had an exceptionally bad start to 2017, which has been flattering the year-on-year comparison through the early parts of this year. Importantly, the Bank of England (BoE) remains confident wage pressures will continue to build.
But it’s not quite the same story for inflation, due to be released on Wednesday. While headline CPI is being kept aloft by higher oil prices, core inflation is likely to remain at 2% as the impact of the pound’s post-Brexit plunge continues to wear off.
Increasingly though, we think the bigger headache for the BoE is likely to be growth. Following a dip in June, Thursday’s retail sales data may stabilise. But much of the recent improvement has been down to the sun, and as normal British summer weather conditions are restored, the cracks in the retail sector are likely to resurface. Incomes remain under pressure, while the increased talk of a ‘no deal’ Brexit could dampen confidence over coming months. For this reason, we don’t expect another Bank of England rate hike before the UK leaves the EU next year.
So far so good, not much of an impact of the China-US trade war on Asian exports in July. But that's no reason to relax just yet - the trade war has just started. It will take a while for the impact to trickle down to the real economy and Asia won't be immune to this
As expected, China’s July trade data showed little impact from the US-China trade war in the initial phase of $34bn of tariffs. The remaining economic data for July – industrial production, retail sales, fixed asset investment, and monetary indicators – is likely to reinforce the same message.
We increase our industrial production growth forecast to 6.4% year on year for July from the 6% in June on the back of firmer exports. Investment and monetary data will shed light on whether recent liberalisation measures in areas of financial securitisation and asset management have started showing results.
Key readings on second-quarter GDP take centre stage in EMEA and Latam next week. Poland and the Czech Republic should see good numbers thanks to strong domestic demand while Hungary could see a mild slow down
In Hungary, there are only two events to watch out for next week, but they're important. On Tuesday, the Statistical Office releases the advance estimate of 2Q18 GDP. We expect a mild deceleration to 4% year-on-year, as both the industry and retail sectors have shown some sign of softening recently.
On Friday, the rating agency Standard & Poor's will review its sovereign debt ratings. In our view, the potential for an upgrade is 50/50. S&P gave a positive outlook exactly a year ago, and the important metrics are looking good. But recent market turmoil and deficit numbers (the EU-transfer story) could prevent the agency from acting. Neither outcome (confirm or upgrade) would come as a surprise, so we only expect a limited market reaction after the decision.
Discover what ING analysts are looking for next week in our global economic calendars