In Hungary and Poland, Q2 GDP numbers will be released
Market movers today
After a couple of days dominated by Scandi-market releases, focus today will turn to the state of the US consumer as private consumption continues to be the main growth engine in the US. Although we think the US economy also risks disappointing in H2 16 due to contagion effects from Brexit uncertainties, we think US consumers will be relatively unaffected. It is mainly through continued weak non-residential investments that the US economy could take a hit from Brexit. However, any contagion effects are yet to be seen. The most important data release today is the retail sales report for July where we estimate the control group (the component that feeds into GDP) grew 0.3% m/m. If we are right, private consumption growth got off to a great start in Q3 after a very strong Q2. The preliminary consumer sentiment index from the University of Michigan for August is also due. We expect it to stay around its current level at 90, which is relatively high, suggesting that US consumers are still optimistic.
In the euro area the second release of Q2 GDP growth is due for release together with the first release of the German figure. The first estimate for the euro area showed economic growth at 0.3% q/q and 1.6% y/y, which is still higher than the potential growth rate of the euro area. Domestic demand has been the main driver of GDP growth in recent years, but the higher oil price in Q2 is likely to have been a headwind to private consumption.
Also Euro area and German industrial production figures for June will be released. In line with the GDP figures mentioned above, the data covers the period before the Brexit vote, implying it will attract less attention.
UK construction data for June will give us information about whether to expect revisions to the first estimate of Q2 GDP growth, which came out pretty strong at 0.6% q/q.
In Hungary and Poland, Q2 GDP numbers will be released. After temporary weakness in Q1, we expect growth to rebound to 0.8% and 1% qoq in Q2, respectively, mainly thanks to relatively strong private consumption growth amid record low unemployment and high wage growth.
Selected market news
In US equity markets the S&P500, Dow Jones and Nasdaq all reached record highs on the same day – a coincidence of events that last happened in 1999. In commodities, the oil price has soared on comments from the Saudi energy minister that OPEC could take steps next month to stabilise oil prices. Brent crude breached USD46/bbl for the first time since 22 July.
The higher oil price has supported traditional G10 oil currencies such as CAD and NOK. The latter has in recent days also been aided by rates markets significantly pricing out the likelihood of additional rate cuts from Norges Bank (NB) amid accelerating housing market and CPI inflation. We want to emphasize that if NB does not react over the next six weeks (including the next monetary policy meeting on 22 September) by either cutting rates or addressing tight NOK liquidity, the higher Nibor fixings following the US money market reform will have driven a defacto monetary tightening in Norway at a time of a continued weak growth outlook.
NB will also be aware that unchanged policy would implicitly ratify this tightening, triggering additional NOK strength (even tighter monetary conditions). We therefore think it is still too early to expect additional NB easing.
In China, retail sales, fixed asset investment and industrial production all disappointed market expectations as rising metal prices, PMI and credit growth had pointed to higher numbers. The releases underline the fragility of the Chinese recovery and increase the probability of additional fiscal easing.
Author
Danske Research Team
Danske Bank A/S
Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.
