Fed Rate Cut Locked In? All Eyes on PCE!

Wednesday, 24 July 2024, 15:45 – US Manufacturing PMI (Jul)

The latest S&P Global US Manufacturing PMI for June 2024 has been revised to 51.6, slightly lower than the expectation of 51.7 but up from 51.3 in May. This indicates an improvement in manufacturing business conditions for the second consecutive month, driven by increased new orders and rising output. The data reflects growing domestic demand and a modest rise in export orders. However, the increase in production is accompanied by higher input costs, leading to higher selling prices, which adds to inflationary pressures in the economy. The upcoming data should continue to reflect moderate growth given the current trends in new orders continue to hold steady.

Wednesday, 24 July 2024, 15:45 – BoC Interest Rate Decision

In its most recent decision in June, the Bank of Canada (BoC) reduced its key interest rate by 25 basis points, lowering it from 5% to 4.75% in response to easing inflation indicators. Recent CPI figures reveal that Canada’s annual inflation rate dropped from 2.9% in May to 2.7%, indicating that previous rate hikes successfully mitigated inflationary pressures. With inflation easing, there is speculation that the BoC might opt for another rate cut in its next decision.

Thursday, 25 July 2024, 14:30 – US GDP (QoQ) (Q2)

In the first quarter of 2024, the US economy expanded at an annualized rate of 1.4%, slightly surpassing market expectations of 1.3%. This growth marked a notable slowdown compared to the 3.4% growth recorded in the fourth quarter of 2023. The deceleration was primarily driven by declines in consumer spending, inventory investment, and federal government expenditures. However, there were positive contributions from housing investment, business spending, and state and local government outlays. Imports, which detract from GDP, increased during this period. The upcoming data may potentially show some improvement, however persistent inflationary pressures, elevated interest rates, and potential reductions in government spending could weigh.

Friday, 26 July 2024, 14:30 – Core PCE Price Index (YoY) (Jun)

The most recent Core Personal Consumption Expenditures (PCE) Price Index for May 2024 reported a year-over-year increase of 2.6%, in line with expectations but slightly lower than the previous month’s 2.8%. This indicates a gradual easing of inflationary pressures, consistent with broader signs of slowing price growth in the economy. This trend offers some comfort to policymakers and markets where inflation is under control. The upcoming data is anticipated to remain stable unless there are substantial changes in economic conditions