The week will start off slowly in terms of scheduled economic events, but markets will remain alert to any unexpected announcements from the U.S. administration, particularly regarding potential retaliatory tariffs.
On Monday, Canada will hold its federal election while on Tuesday, in the U.S., we will receive the JOLTS job openings report and the CB consumer confidence Index.
On Wednesday, in Australia the focus will be on inflation data. In the U.S., key releases will include the ADP non-farm employment change, the advance GDP q/q, and the core PCE price index m/m.
On Thursday, the BoJ will release its monetary policy decision while in Europe markets will be closed for Labor Day. In the U.S., data releases will include unemployment claims and the ISM manufacturing PMI.
On Friday, the U.S. labor market will be in focus with the release of average hourly earnings m/m, non-farm employment change, and the unemployment rate.
In the U.S., the consensus for the CB consumer confidence index is 87.4, down from the prior reading of 92.9. Households are increasingly concerned about the impact of tariff-induced price hikes on their spending power, as well as the stock market downturn negatively impacting their investments and savings.
In Australia, the consensus for the CPI q/q is 0.8% vs. the prior 0.2%; for the CPI y/y, it is 2.3% compared to 2.4% previously; and for the trimmed mean CPI q/q, it is 0.6% vs. 0.5% prior. Analysts at Westpac note that, compared to previous quarters, cost-of-living measures such as energy rebates are unlikely to have a significant impact this time.
Meanwhile, the trimmed mean CPI—a key measure of core inflation—is expected to rise by 0.6% for the quarter, bringing the annualized rate down to 2.8%. Momentum in core inflation remains comfortably within the RBA’s target band, though risks to the forecast are tilted slightly to the upside.
The consensus for the U.S. advance GDP q/q is 0.4%, compared to the prior 2.4%. After real GDP rose in recent quarters, fueled by strong consumer spending, expectations for this week’s release are much less optimistic, with the U.S. economy facing a sharp slowdown to just 0.1% annualized growth in Q1 2025.
A surge in imports ahead of anticipated tariff hikes is expected to weigh down on GDP growth, but the inventory buildup will provide some cushion. Consumer spending was soft early in the year but improved in March, helped by better weather and a rise in purchases done before tariffs would impact prices.
Business investment appears poised for a rebound, mainly driven by aircraft orders, although broader capital expenditure remains subdued. Meanwhile, residential investment is expected to stay modest amid ongoing affordability challenges and high inventory levels, analysts from Wells Fargo said.
At this week’s meeting, the BoJ is widely expected to keep its policy rate unchanged at 0.50%, with policymakers opting for caution given the latest mixed economic backdrop.
Growth in Japan remains solid, and inflation continues to exceed the 2.0% target. However, the Bank is likely to adopt a wait-and-see approach amid heightened uncertainty surrounding U.S. trade policy and a stronger yen.
Traders will closely monitor the updated economic projections, particularly for any adjustments to inflation and growth forecasts. The BoJ is still expected to deliver a rate hike at some point later this year.
In the U.S., the consensus for the ISM manufacturing PMI is 48.0, down from the prior 49.0. The index has slipped into contractionary territory and is expected to remain there in the near future as manufacturers are facing pressure from elevated interest rates, soft demand and renewed tariff concerns.
Analysts from Wells Fargo note that regional Fed surveys point to weaker new orders and rising input costs, as firms grapple with higher prices for steel, aluminum, and other imported goods. With demand under strain and cost pressures mounting, capital spending and hiring are likely to stay subdued in the near term, keeping manufacturing growth on the back foot.
In the U.S., the consensus for average hourly earnings m/m is 0.3%, unchanged from the prior reading. For non-farm employment change, the forecast is 129K compared to the previous 228K, while the unemployment rate is expected to remain steady at 4.2%.
The labor market is anticipated to show modest growth. Heightened uncertainty from shifting trade policies and federal funding freezes has cooled hiring appetite, as reflected in declining job postings and weakening service sector indicators. However despite softer demand for new workers, layoffs remain subdued, keeping the unemployment rate stable.
This article was written by Gina Constantin at www.forexlive.com.
