Macroeconomics: The Day Ahead for 28 June

A deluge of data awaits the end of month and quarter, the latter perhaps muting reaction, above all with the weekend event risk of the first round of the French elections, with next Thursday also seeing the UK election as well as the US Independence Day holiday. US, Eurozone and Japan inflation data top the agenda, with Industrial Production from Japan and South Korea, UK Lloyds Business Barometer, final Q1 GDP and Current Account, French and Spanish provisional CPI/HICP to digest, while ahead Italian CPI, Eurozone Inflation Expectations, Canadian monthly GDP and US Personal Income and PCE, Chicago PMI and final Michigan Sentiment. In event terms, there is the first US Presidential TV debate to mull over, with a fair volume of central bank speakers and an expected further 50 bps rate cut from Colombia’s BRC. In the agricultural commodity sector, the focus will be on the USDA’s 2024 Acreage data and the Q2 inventories reports.

** U.K. – June Lloyds Business Barometer, Q1 final GDP **

– The set back in the Lloyds Business Barometer to 41 from 45 still leaves it at a very solid level, as it had been since the start of the year, and in truth just takes it back to April’s level, and perhaps suggests May’s jump was a reaction to the election announcement, which a dreary downbeat election campaign has taking the shine off. The upward revision to Q1 GDP was paced by an upward revision to Personal Consumption to 0.4% q/q from 0.2%, and a stronger contribution from Net Exports, though there were less welcome messages from revisions lower to Govt Spending and Business Investment. The data is historical, but does underline that the BoE can be cautious on rate cuts as the economy is expanding at a modest pace, even if Q2 will see a marked deceleration, which along with CPI returning to target, leaves the door wide open for an August rate cut, though the BoE will be keeping a close eye on what the new government intends to do on the fiscal side of the equation.

** France, Italy & Spain – June prov. CPI  / French election **

– Sunday’s first round of French Assembly elections will continue to cast a long shadow and may well mute reaction to the CPI data. All of the national reports were expected to fall in y/y terms on the month, with France HICP benefitting from lower petrol prices and benign Food price base effects, and Spanish HICP dropping as expected to 3.5% y/y from 3.8%, paced above all by petrol and utilities base effects. Italy’s HICP will likely dip back to 0.6% y/y from 0.8%, on the back of falls in food & energy prices, with core also likely to dip. Opinion polls continue to show Le Pen’s RN ahead on 35/36%, the Alliance of the Left on 29% and Macron’s Renaissance trailing on 21%, with little movement seen on the week. In seat terms, no party/grouping is expected to get a majority in the 577 seat assembly, with RN estimated at 220-260, leftist New Popular Front alliance 180-210 and Renaissance 75-110. In other words, another minority government appears likely, though whether it would or could be anything more than a caretaker government is highly debatable, and whether Macron would resign and call a presidential election also a matter for a lot of discussion, regardless of whether he has ruled out that as a potential resolution option.

** U.S.A. – May Personal Income & PCE **

PCE deflators will be the focal point, and are expected to echo CPI, with headline seen flat m/m to edge the y/y rate down 0.1 ppt to 2.6%, and core seen up 0.1% to bring the y/y down to 2.6% from 2.8%, the lowest since March 2021 (i.e. when the Fed was still in ‘team transitory’ mode). Gasoline prices and food will likely be the key drag, while weaker transportation and financial services prices will largely offset continued upward pressure from health care on the core.

** Colombia – BRC rate decision **

– Colombia’s BRC is expected to cut rates by 50 bps to 11.25%, and retain its easing bias, with the focus on divisions on the policy committee about the inflation and rates outlook, with one member likely to vote again for a larger cut. Also of note will be any comments on the renewed weakness in the COP, even if this has been broadly in line with other LatAm and EM currencies.