Watch FOMC, U.S. jobs, Mexico’s Congress

Genevieve Signoret & Patrick Signoret

Macro Views

Next week: the highlights

• During the week of 28 July. Mexico: Congress works on laws to implement last year’s energy reform. Energy reform in Mexico is now moving full speed ahead. Everyone expects the laws to be passed by Congress with few changes and signed into law by President Peña Nieto quickly now. Hence, our central scenario assumption that last year’s energy reform will become law during August 2014 will almost certainly hold. This should spur fixed investment demand, contributing to the acceleration we’re forecasting for Mexican GDP starting in the second half of this year.
• Wednesday 30. USA: GDP (Q2, flash). Consensus estimate: 2.9% quarter on quarter annualized rate (from –2.9% in Q1). Federal Reserve monetary policy decision. We expect the FOMC to announce another $10 bn taper, slowing down monthly asset purchases to $25 bn. The Committee will discuss when and how to start tightening, but we’re unlikely to learn details of the discussion until the minutes come out three weeks later (this meeting will not followed by a press conference).
• Thursday 31. Euro Area: consumer prices (Jul, flash). Consensus estimate: 0.5% y/y (from 0.5% in June).
• Friday 1 August. USA: personal income, consumption and saving (Jun). This release includes the PCE core inflation index, the Fed’s favorite. It has been moving up recently (to 1.8% in May) but is still below the 2.0% objective. Nonfarm payrolls and unemployment rate (Jul). The labor market is gradually recovering, though extraordinarily low labor force participation suggests that there’s still ample slack. Consensus estimates: unemployment rate unchanged at 6.1%; nonfarm payrolls to +230K from last month’s +288K.

Next week in detail

Events in red are those most likely to shake markets.

During the week

• India: RBI: Monetary policy decision.
• Mexico: Congress works on laws to implement last year’s energy reform. Energy reform in Mexico is now moving full speed ahead. Everyone expects the laws to be passed by Congress with few changes and signed into law by President Peña Nieto quickly now. Hence, our central scenario assumption that last year’s energy reform will become law during August 2014 will almost certainly hold. This should spur fixed investment demand, contributing the acceleration we’re forecasting for Mexican GDP starting in the second half of this year.

Tuesday 29

• USA: Conference Board consumer confidence (Jul), S&P/Case-Shiller house prices (May). House prices have slowed down in the past few months. The Fed singled out the sector in its semi-annual monetary policy report published July 15, saying that it was concerned with its loss of traction. Consensus estimate: 9.7% y/y (from 10.8% in April).

Wednesday 30

• Japan: Industrial production (Jun).
• Korea: Industrial production (Jun).
• Euro Area: ECB bank lending survey (Q2).
• Germany: Consumer prices (Jul, flash).
• USA: GDP (Q2, flash). Consensus estimate: 2.9% quarter on quarter annualized rate (from –2.9% in Q1). Federal Reserve monetary policy decision. We expect the FOMC to announce another $10 bn taper, slowing down monthly asset purchases to $25 bn. The Committee will discuss when and how to start tightening, but we’re unlikely to learn details of the discussion until the minutes come out three weeks later (this meeting will not followed by a press conference).
• Mexico: Federal government income and spending (Jun).

Thursday 31

• Euro Area:Unemployment rate (Jun), consumer prices (Jul, flash). Consensus estimate: 0.5% y/y (from 0.5% in June).
• USA: Unemployment claims (Jul 26).
• Mexico: Money supply and commercial bank lending (Jun).

Friday 1 August

• Global: Markit manufacturing PMIs (Jul). Consensus estimates: USA +0.2 to 57.5, China +0.3 to 51.0, euro area –0.1 to 51.7.
• Japan: BoJ speech: Kuroda.
• China: NBS manufacturing PMI (Jul).
• Korea: Consumer prices (Jul), Foreign trade (Jul).
• USA: ISM manufacturing PMI (Jul), personal income, consumption and saving (Jun). This release includes the PCE core inflation index, the Fed’s favorite. It has been moving up recently (to 1.8% in May) but is still below the 2.0% objective. Nonfarm payrolls and unemployment rate (Jul). The labor market is gradually recovering, though extraordinarily low labor force participation suggests that there’s still ample slack. Consensus estimates: unemployment rate unchanged at 6.1%; nonfarm payrolls to +230K from last month’s +288K.
• Brazil: Foreign trade (Jul), industrial production (Jun).
• Mexico: Banxico survey of professional forecasters (Jul), family remittances (Jun), IMEF manufacturing and nonmanufacturing PMI (Jul).