Summary
United States: Solid Activity Raises Questions About the Degree of Policy Easing
- Financial markets were volatile last week as they digested a troubling rise in the unemployment rate in July. The economic calendar this week was packed with solid data that helped quell recession jitters. Inflation continues its gradual descent, and small business optimism has trended higher amid cooler input price growth and steady consumer spending.
- Next week: Leading Economic Index (Mon.), Existing Home Sales (Thu.), New Home Sales (Fri.)
International: Steady U.K. Growth, Gradual Inflation Slowdown Mean Measured Central Bank Easing
- This week’s U.K. data were mixed, which we believe keeps the Bank of England on track for a pause in September before resuming rate cuts in November. Q2 GDP grew a respectable 0.6% quarter-over-quarter, employment growth was solid and private sector regular pay growth slowed moderately. We think these factors will keep the Bank of England on hold next month, even as the July CPI showed services and core inflation decelerating a bit more than expected.
- Next week: Riksbank Policy Rate (Tue.), Canada CPI (Tue.), Eurozone PMIs (Thu.)
Interest Rate Watch: Fishing in Jackson Hole for Clues About the Fed Rate Path
- Chair Powell’s highly-anticipated annual speech at Jackson Hole is likely to emphasize how much the inflation and labor market picture have changed in the year since the FOMC took the fed funds target range to 5.00%–5.25%, laying the groundwork for a rate cut at the FOMC’s September meeting.
Topic of the Week: Lower Income Household Liquidity Crunch
- Amid a slowdown in the labor market, the staying power of the consumer is once again central to the economic outlook. However, consumer purchasing power may be dwindling for lower income households as they face an increasingly constrained availability of liquid assets.
