Japan: Data point to a possible modest upwards revision to Q2 GDP; July wage figures also due
* While the first estimate of Japanese GDP in Q2 had reported a solid rebound of 0.8%Q/Q, the MoF’s survey of financial statements of corporations suggested a possible modest upwards revision to Q2 GDP when updated figures are published next week. Admittedly, the increase in nominal investment (excluding spending on software, which tallies more closely with the national accounts measure) of 1.9%M/M was bang in line with the first release of GDP. But the contribution from private inventories now looks set to have been broadly neutral in Q2, compared with a modest drag report in the preliminary release. As such, real GDP growth might well be nudged higher by 0.1ppt to 0.9%Q/Q. The near-term investment outlook should also be supported by another decent increase in ordinary profits in Q2, which rose for the sixth quarter of the past seven, by 6.6%Q/Q, to a new record high in both the manufacturing and non-manufacturing sectors alike.

* Later this week will bring labour cash earnings data for July on Thursday. After jumping a striking 4.5%Y/Y in June as this year’s Shunto pay negotiations started to feed through, growth in total pay is expected to slow to around 3%Y/Y in July, still well above the average of around ½%Y/Y in the five years before the pandemic. This in part will reflect a smaller contribution from bonus payments. In contrast, regular pay growth is likely to remain close the 2.2%Y/Y rate recorded in July, while full-time regular pay growth (on a same sample basis) is also expected to be little changed from 2.7%Y/Y recorded in May and June. Meanwhile, the end of the week will bring the BoJ’s consumption activity indices, which will provide an update on spending at the start of Q3.

China: PMIs suggest that the economy stagnated over the summer
* China’s PMIs continued to flag challenges, with the government’s survey signalling ongoing stagnation over the summer. The headline composite PMI eased slightly to 50.1 in August, the softest reading since December 2022. The manufacturing output PMI fell 1.2pts to six-month low of 49.8, suggesting renewed contraction in the sector, as new orders continued to decline. And while the non-manufacturing index edged very slightly higher (up 0.1pt to 50.3), new business also continued to decline, suggesting ongoing lacklustre growth over the near term.

US: All eyes on Friday’s labour market report and ISM surveys
* Ahead of the Fed’s monetary policy meeting later this month, the main focus this week will be the August employment report on Friday. Having slowed sharply in July (114k) perhaps in part due to the impact of Hurricane Beryl that hit in the week that payrolls figures were collected that month, Daiwa America forecasts a slight pickup in non-farm payrolls last month, by around 170k, albeit remaining below the average rise of 218k in H124. This could leave the unemployment rate unchanged at 4.3%, the joint-highest since October 2021 and 0.9ppt above the low at the start of 2023, although the risks are skewed to a slight decline from July. Nevertheless, growth in average hourly earnings could remain close to the average of the past years (+0.3%M/M). JOLTS data for July will also be published on Wednesday.

* Survey-wise, the manufacturing ISM (tomorrow) is expected to signal ongoing modest contraction in August – for the 21th month out of the past 22 – as tight financial conditions, elevated borrowing costs and subdued demand continue to weigh. But the services ISM (Thursday) is expected to have moved broadly sideways at 51.4, signalling ongoing modest expansion and therefore supportive to the view the US economy continues to grow in Q3 at a relatively solid pace. Trade data for July (Wednesday) is likely to confirm a notable widening in the advance goods trade deficit ($102.7bn) in July, amid a strong increase in imports. The Fed’s Beige Book, July factory orders and August vehicle sales data are also due Wednesday.

Euro area: Updated euro area national accounts and German industrial figures in focus
* In the euro area, updated national accounts figures from the euro area (Friday) will include the first publication of the expenditure breakdown in Q2. The preliminary estimate saw GDP growth move sideways at 0.3%Q/Q in Q2, 0.1ppt below the ECB’s latest projection. While the modest contraction in Germany (-0.1%Q/Q) was confirmed, French GDP growth was revised down by 0.1ppt to 0.2%Q/Q. The updated estimate of euro area growth will also in part depend the Irish figures (due Thursday), where data revisions are often very significant. The flash Irish GDP estimate in Q2 recorded growth of 1.2%Q/Q, accounting for roughly 0.1ppt of euro area growth. In terms of the euro area expenditure breakdown, we expect fixed investment to provide a non-negligible boost, not least due to the anticipated contribution from Ireland, while government spending and net trade will also likely have expanded. This release will also bring an updated estimate of unit labour costs and insight into unit profits, with the latter expected to show that wage pressures were again largely absorbed by profit margins. 

* Looking to developments at the start of Q3, data for euro area retail sales in July (Thursday) should report a modest increase in sales following the drop in June (-0.3%M/M), tallying with the improvement in consumer purchase intentions that month. The back end of the week will also focus on the manufacturing sector, with the release of German factory orders and industrial production data for July (Thursday and Friday respectively). Following the first monthly rise in six in June, surveys suggest renewed weakness in orders at the start of Q3. Indicators provide mixed messages about production in July, with truck toll mileage having inched slightly higher, but surveys signalling a notable decline. Expectations are for a modest decline following the increase in June (1.4%M/M). 

UK: BoE DMP survey to provide an update on firms’ inflation and wage growth expectations
* Surveys will dominate the UK dataflow this week. Arguably most noteworthy in terms of monetary policy will be the results of the BoE’s Decision Maker Panel survey on Thursday, which will provide an update on firms’ inflation and wage growth expectations. In July, the median forecast for the headline CPI rate one year and three years ahead eased to 2.5%Y/Y, suggesting that inflation expectations remain well anchored. And while expectations for wage growth ticked slightly higher (4.1%Y/Y), this still marked the second-lowest reading for more than two years and was more than 2ppts below the peak. Meanwhile, the final August PMI surveys for the manufacturing (today) and services sectors (Wednesday) are likely to repeat the signal of a notable easing in services price pressures flagged in the flash releases. The latest construction PMI (Thursday) and BRC retail sales monitor (tomorrow) will also provide an update on growth momentum over the summer.