Proactive Investors - With Jackson Hole out of the way, the economic focus next week switches back to the US jobs market and personal income and spending numbers due next week.
The figures will provide further evidence for the ‘data dependent’ Federal Reserve as it weighs up the merits of a further rise in interest rates.
The CME Fedwatch tool sees an 81% chance that rates will left unchanged at the September meeting and a 51% likelihood of no change in November.
The US labour market has so far proved resilient in the face of the rate rising spree by the Federal Reserve which has seen borrowing costs hit a 22-year high.
The most recent weekly jobless claims figures, a proxy for lay-offs, showed a fall of 10,000 to 230,000 in the week ended August 19, which were “consistent with relatively tight labour market conditions”, according to Nancy Vanden Houten at Oxford Economics.
But next week’s payrolls could start to show a slowdown in the jobs market.
Andrew Hunter, deputy chief US economist at Capital Economics, predicts a 170,000 increase in non-farm payrolls in August.
“The increases in employment of 185,000 and 187,000 over the previous two months have been the weakest gains since December 2020. If the recent pattern of monthly revisions continues – which has seen the initial estimate revised down by an average of 40,000 so far this year – the slowdown in employment growth may already be even sharper," Hunter said.
The Capital Economics economist added that this scenario may give the US Federal Reserve "a little more confidence" that labour market conditions are continuing to move into "better balance".
Ahead of the jobs report on Friday will come the usual precursors to the main event, with JOLTS jobs vacancy figures on Tuesday, the ADP payroll report on Wednesday and the usual weekly jobless claims figures on Thursday.
The other key focus in the US will be the income and spending numbers which are likely to show that spending continues to outstrip income growth, with households continuing to rely on credit and the running down of savings to fund their lifestyle spending habits.
ING Economics suspects “that this means we could see GDP expand at more than a 3% annualised rate in the third quarter.”
In Europe, ING says next week will be “all about inflation.”
“After August last year saw a huge spike in energy prices, we expect base effects to cause a drop,” it said.
“The most important reading to look out for will be core inflation, which remained stubbornly high at 5.5% in July and is currently being pushed higher by the effects of government subsidies,” ING noted.
ING forecasts a modest fall to 5.4% in August’s core rate although it expects the largest deceleration of core inflation to happen later in the year.
Back in the UK, the housing market will once more be in the headlines.
Figures from the Bank of England will detail the level of mortgage approvals as the market struggles in an environment of rising mortgage rates and the cost of living crisis.