Last Week’s Highlights
New Zealand Retail Sales Fare Better Than Expected
The latest retail sales report for the quarter from New Zealand showed that the decline was much lower than expected. Retail sales fell by 15% on the quarter ending June 2020, during the Covid-19 lockdown.
It was the biggest drop in 25 years. The declines came largely due to lower food and beverage services which fell 40%. Fuel also saw a drop of 35%.
In fact, most businesses saw unprecedented declines in the June quarter.
New Home Sales Rise for a 2nd Month in July
New home sales in the United States for July saw another month of solid gains. Data from the Commerce Department showed that new home sales rose by 13.9% on a monthly basis. This comes on the back of a 15.1% increase in June.
Economists forecast only a 1.2% increase in new home sales. The monthly increase pushed new home sales to the highest levels since December 2006.
German Q2 GDP Contracts Less than Forecasts
The German economy contracted less than forecast during the three months ending June 2020. However, the pace of declines was one of the fastest on record.
According to data from Destatis, German GDP fell 9.7% on a sequential basis. This comes after the economy fell 2% in the first quarter.
The latest estimates show a revision from the -10.1% that was reported during the initial estimates. On a yearly basis, German GDP fell 11.3% in the second quarter comparing to a 2.2% decline in the first quarter.
Durable Goods Orders Surge in July
The latest durable goods orders report from the US showed a continuation in the increase in the orders. Data from the Commerce Department showed last Wednesday that new orders rose more than forecasts.
Headline durable goods orders jumped 11.2% during the month following a revised 7.7% increase in June. Economists forecast an increase of 4.3%. The gains came amid an increase in the orders for transportation equipment which rose by 35.6% during the month from 19.7% in June.
Non-defense capital goods excluding aircraft rose by 1.9% in July. This was a slower pace compared to the 4.3% increase in June.
Fed unveils new inflation targeting framework
The Federal Reserve Chairman, Jerome Powell took the stage at the Jackson Hole symposium last week. Investors were keenly tuned into the speech amid the current pandemic. Fed’s Powell unveiled a new inflation targeting framework. This was a major shift on how the central bank achieves maximum employment and price stability, also known as the dual mandate. In the new approach, the central bank said that it wont raise rates in response to low unemployment levels. On the contrary, the central bank is now willing to let inflation overshoot the 2% inflation target rate.
Upcoming Economic Events
RBA Meeting and Australia GDP
It will be a busy week for the Australian dollar as the RBA meeting kicks off a new trading month. No changes are expected from the central bank at this week’s meeting.
Still, officials might continue to maintain a dovish outlook on the economy. Later in the week, the quarterly GDP numbers are due out on Wednesday. Forecasts show a second-quarter contraction of 0.3%. This is the same pace of decline as the first quarter.
On a yearly basis, Australia’s GDP is forecast to expand at a rate of 1.4%, which remains consistent with the previous increase during the first quarter.
ISM Manufacturing PMI to Ease in August
Manufacturing activity as measured by the Institute for Supply Management is forecast to show a modest decline.
The index is forecast to fall to 54.0 during the month, down from 54.2 in July. The ISM prices paid index is also forecast to slide from 53.2 to 52.0 during the period.
The slower pace of activity is attributed to the period when the US still saw quite a few businesses struggling to re-open.
Later in the week, on Friday the non-manufacturing PMI is forecast to show a similar trend. The activity in the services sector is tipped to ease to 57.1 in August, down from 58.1 in July.
Canada Unemployment to Rise in August
Canada will also be releasing its monthly payroll report on Friday, simultaneously with the US. However, the outlook is somewhat different.
Economists forecast that Canada’s unemployment rate will rise from 10.9% in July to 11% in August. This comes as the net employment change is set to fall to 400k compared to 418.5k in July.
Canada’s unemployment surged since April but started to slip back from May onward. If the unemployment rate rises to 11%, it would be the first increase in three months.
US Unemployment to Fall to 9.9%
The latest monthly payrolls report is due this week. Data from the Labor Department is forecast to show that the US economy added 1.5 million jobs during the month of August. This is a slower pace of increase compared to the 1.7 million jobs in July.
However, the unemployment rate is forecast to fall from 10.2% to 9.9% during the month.
Hourly wages are expected to continue ticking higher. On a month over month basis, hourly earnings are forecast to rise from 4.8% to 5.8% for August.