The week ahead: 23 - 27 September 2024

United States – On Monday we get the preliminary PMIs from S&P. We expect manufacturing to rebound to 49.7 on the back of stronger industrial production, while services will remain high at 55.5. On Wednesday, there is the third revision of Q2 GDP growth, where markets may be looking for any sign of weakness. Friday sees the main release this week, the August consumption report. We nowcast core PCE inflation to rise by 0.15%, slightly above the 0.2% threshold, with significant probability of an 0.1%. Due to base effects, the y/y figure will increase to 2.7% from 2.6%, despite the monthly reading being consistent with the 2% target. Headline will likely come in at 0.1%, slowing the y/y rate to 2.2%. The increase in average hours worked supports income growth, which we estimate at 0.5%, while spending may be subdued after the large gain in July.

Eurozone – The flash PMIs for September are the main focus. We expect some stabilisation in the manufacturing sector, but with German weakness likely (which will also be evident in the IFO this week) to continue to weigh on the aggregate figure. The services PMI is expected to pull back as the Olympics boost in France fades. French inflation on Friday will also give an early read on aggregate eurozone inflation which is due the following week. We expect a significant decline in inflation, as lower oil prices feed through to petrol prices, and with services inflation also likely to cool as the Olympics impact unwinds.

China – After several of China’s policy rates were kept unchanged this week, consensus expectation including ours is for the 1-year medium-term lending facility rate to be kept on hold on Wednesday 25 September as well. That said, given low inflation and weak domestic demand, we continue to expect further RRR cuts and (small) rate cuts going forward – next to additional targeted fiscal and regulatory support measures. In fact, the 50bp cut by the US Federal Reserve this week has given the PBoC somewhat more room to manoeuvre in this respect. Meanwhile, the PBoC is tweaking its monetary policy toolkit, with the 7-day reverse repo rate gaining weight amongst China’s various policy rates.