UK Consumer Confidence Index for August

Economic

Summary:

UK Consumer Confidence remains stable in August at -13.Confidence in personal finances is up, but expectations for the UK economy slip for first time since February.

GfK's long-running Consumer Confidence Index stood at -13 in August, the same as July. Three measures were up and two were down in comparison to last month's announcement.

Joe Staton, Client Strategy Director GfK, says: “The Overall Index Score is unchanged at -13, although there are interesting contrasts behind this headline. On the one hand, our expectations for the UK’s economy are down for the first time since February, with this measure registering a four-point decrease to -15. There’s a three-point drop in how consumers view the economy last over the past year too. At the same time, there are strong personal financial expectations for the coming year with a three-point uptick in this measure to +6. This more positive outlook may be due to a mortgage friendly interest rate cut at the beginning of August – and hopes of more to come. The three-point jump in the Major Purchase Index is great news for retailers with more shoppers agreeing that now is a good time to buy big-ticket items. The wider point beyond the contrasts is that all the key numbers this month are significantly more encouraging than 12 and 24 months ago. But as we move into autumn and winter, how much further will this slow improvement in the mood of the nation run?”

UK Consumer Confidence Measures – August 2024:The Overall Index Score stood at -13 in August, the same as July. Three measures were up and two were down in comparison to last month’s announcement.

Personal Financial Situation:The index measuring changes in personal finances during the last year is up one point at -7; this is eight points better than August 2023.The forecast for personal finances over the next 12 months is up three points at +6, which is nine points higher than this time last year.

General Economic Situation:The measure for the general economic situation of the country during the last 12 months is down three points at -35; this is 17 points higher than in August 2023.Expectations for the general economic situation over the next 12 months are down four points at -15; this is 15 points better than August 2023.

Major Purchase Index:The Major Purchase Index is up three points to -13; this is 11 points higher than this month last year.

Savings Index:The Savings Index has increased six points to +33; this is six points higher than this time last year.

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Samantha Luan

Economic

Financial Performance

Netflix’s Q2 2024 earnings report highlights a robust performance, demonstrating a 17% growth in revenue and a notable increase in operating margin to 27.23% from 22% in the same quarter last year. The intense growth in the operating margin during the past two decades is shown in the chart below. The revenue growth was primarily driven by a 16% increase in the average number of paid memberships.

The revenue and operating margin increase signals Netflix’s effective strategy in expanding its subscriber base and optimizing operational efficiency. These results suggest a positive outlook for Netflix, as the company has surpassed expectations and demonstrated its ability to capitalize on its growing global footprint.

Netflix Poised for Continued Growth Despite Overbought Levels_1

Moreover, the company’s decision to enhance its TV homepage and introduce various hit series and films has attracted a larger audience. The success of series like “Bridgerton S3” and movies such as “The Roast of Tom Brady” contributed to Netflix achieving its largest live audience to date.

By focusing on popular content and user experience, Netflix is positioned well to retain and grow its subscriber base. This strategic emphasis on content and platform innovation is bullish for the company, suggesting sustained user engagement and revenue growth.

Netflix’s steady progress in scaling its advertising business also bodes well for its future growth. The 34% quarter-on-quarter growth in ads tier membership indicates a significant new revenue stream still in its early stages of development.

Netflix plans to test an in-house ad tech platform in Canada in 2024. They intend to expand this platform more broadly in 2025, setting the stage for a more diversified and robust revenue model. This strategic move into advertising could unlock substantial value for the company and its shareholders, further supporting a bullish outlook.

Finally, the impressive year-over-year growth in EPS, from $3.29 to $4.88, reflects Netflix’s enhanced profitability. Including a $43 million non-cash unrealized gain from foreign exchange remeasurement adds to the strong earnings performance, highlighting Netflix’s effective financial management amid currency fluctuations. This financial resilience, combined with strategic growth initiatives and content innovation, underscores a bullish case for Netflix as it continues to expand its global presence and revenue streams.

On the other hand, Netflix’s forecast for the remainder of 2024 also indicates an optimistic outlook, with an expected revenue growth of 14% to 15%, up from the previous estimate of 13% to 15%. This revision reflects the company’s confidence in solid membership growth and the resilience of its business model despite foreign exchange challenges.

Netflix also projects an operating margin increase of 26%, driven by improved revenue expectations and disciplined expense management. These factors suggest a bullish trend for Netflix as it continues to expand its profitability and market presence, demonstrating strong financial health and the ability to navigate global economic conditions effectively.

Technical Performance

The technical outlook for Netflix is strongly bullish, as seen in the monthly chart below. It shows that the stock price has remained within a bullish trend throughout the 21st century. This trend is observed using the blue trend lines, and the price has continuously traded within this channel for the past two decades. During this period, two strong buy signals were observed within this bullish trend. The first buy signal was at the low of $7.544 in 2012, while the second occurred in 2022 at $162.71.

The RSI was nearly oversold when these signals emerged, and the price resulted in a continued rally following these signals. The stock price has continuously risen since the 2022 bottom, indicating that it may achieve a solid upward move in the next few months. The chart shows that the RSI is approaching overbought levels, but there are no signs of a top formation. Historically, Netflix has continued to move upward, even within overbought market levels.

Netflix Poised for Continued Growth Despite Overbought Levels_2

To further understand the above analysis, the calculations show that Netflix has the potential to continue its bullish momentum for longer period due to the confirmation of a bottom. This scenario is illustrated in the chart below, which shows that the 2004 drop in Netflix was a 78% decline, resulting in a bottom in Q1 2005 at $1.2729. The 2012 drop was an 83% decline, leading to a bottom at $7.5443, while the 2022 drop was a 77% decline, resulting in a bottom at $162.71.

These bottoms initiated a rally of over 1500% from their respective lows toward the cycle top. Therefore, Netflix’s bottom in 2022 will likely continue higher, reaching new highs. The rally has not yet exceeded a 500% gain from the respective bottom, suggesting there is much more potential for growth in the next months.

Based on the above explanation, Netflix’s stock price is still likely to remain elevated at higher levels, and every short-term correction is likely to be bought. Despite the overbought conditions, the price is likely to continue moving higher.

Netflix Poised for Continued Growth Despite Overbought Levels_3

Risk Analysis

Despite Netflix’s strong financial and technical performance, several market risks could impact its future growth and profitability. One significant risk is the potential for increased competition in the streaming industry, which could lead to a slowdown in subscriber growth or even a decline in market share.

Competitors like Disney+, Amazon Prime Video, and HBO Max continue investing heavily in content creation and distribution, which may dilute Netflix’s market presence and pressure its pricing power. Additionally, changes in consumer preferences, such as a shift away from streaming services or a preference for competitors’ offerings, could negatively affect Netflix’s revenue growth and subscriber base.

Another market risk relates to macroeconomic factors and foreign exchange fluctuations, which Netflix has acknowledged as potential challenges. Given the company’s substantial international operations, currency volatility can significantly impact its reported financial results. For example, a strengthening U.S. dollar against other currencies could reduce the value of Netflix’s international revenues when converted back to dollars, negatively impacting its profitability.

Furthermore, global economic downturns or recessions could reduce disposable income, lowering demand for discretionary services like streaming subscriptions. This risk is particularly relevant as Netflix continues to expand its presence in emerging markets, where economic instability could have a more pronounced effect on consumer behavior.

Bottom Line

In conclusion, Netflix’s Q2 2024 earnings report demonstrates strong financial and technical performance, supported by impressive revenue growth, an expanding subscriber base, and effective cost management. The company’s focus on content innovation, user experience, and a diversified revenue model, including an expanding advertising business, positions it well for continued growth.

While the technical analysis shows a bullish trend with significant potential for future gains, market risks such as increased competition, macroeconomic factors, and currency fluctuations could pose challenges. Nevertheless, Netflix’s strategic initiatives and financial resilience suggest it is well-prepared to navigate these risks and capitalize on growth opportunities, maintaining a positive outlook for its future performance. The cycle’s bottom in 2022 for Netflix’s stock price suggests that the stock will likely move higher, and investors may consider buying on dips.

Source:FXEMPIRE

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Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Bitcoin heads into the August monthly close with a welcome recovery as BTC price action targets $65,000.

The largest cryptocurrency has delivered a remarkable show of strength over the past week, and traders hope the good times will continue.

A sideways weekend aside, BTC/USD is cementing its gains and is now up an impressive 40% from the month’s $45,500 lows.

The coming monthly candle close should thus provide an interesting trading environment as anticipation grows over a breakout from a consolidation phase which has lasted nearly half a year.

Can Bitcoin finally retackle all-time highs?

Month-to-date, BTC/USD is now almost back at its starting position, but plenty of volatility catalysts await.

Macroeconomic data will come thick and fast toward the end of the week, presenting a fresh test of nerve for the increasingly risk-averse Bitcoin short-term holder cohort.

Fundamentals, meanwhile, look good, with mining difficulty due a modest uptick in the coming days.

Sentiment is back in neutral territory, with the average crypto investor leaving their cold feet behind with impressive speed.

Cointelegraph takes a closer look at the state of play on Bitcoin ahead of a key week for the cryptocurrency which just a fortnight ago was battling calls for a fresh bear market.

Bitcoin monthly close in the spotlight

Bitcoin is firmly bouncing back after a harrowing start to August, but traders’ attention is now on the monthly close. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_1

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_1

BTC/USD 1-hour chart. Source: TradingView

Such events constitute volatility triggers on their own, and while up 40% versus the month’s lows, BTC price action has much to contend with.

“Bitcoin Fought its way back to an almost break even August,” popular trader Daan Crypto Trades summarized on X alongside data from monitoring resource CoinGlass. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_2

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_2

BTC/USD monthly returns (screenshot). Source: CoinGlass

Order book liquidity insights nonetheless show formidable resistance lingering overhead, with spot BTC price separated from all-time highs by a wall of asks. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_3

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_3

BTC liquidation heatmap (screenshot). Source: CoinGlass

“Now let's see if there's also fuel to actually push higher for a change,” Daan Crypto Trades continued.

A further post acknowledged the unprecedented length of BTC price consolidation following its last all-time high in mid-March.

“Bitcoin It has been close to 6 months of ‘Consolidation’ at the previous cycle high,” he told followers.

“This is by far the longest time it took to break a previous all time high. It was also the quickest price has made a new all time high in a cycle (before the halving). It all balances out.”

BTC/USD 2-week chart. Source: Daan Crypto Trades/X

Fellow trader Crypto Tony joined those calling for a solid reclaim of support to sustain further recovery moves. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_5

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_5

Source: Crypto Tony/X

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD at the time of writing at around $63,700, having stayed flat throughout the weekend.

PCE week arrives mid countdown to Fed rate cut

The Fed’s “preferred” inflation metric forms one of the week's macroeconomic data highlights as markets become more confident over financial policy easing.

The July print of the Personal Consumption Expenditures (PCE) index is due on Aug. 30, a day after US Q2 GDP data.

Both will follow a key earnings report from NVidia — an event which has become a yardstick for tech industry health this year.

Trading resource The Kobeissi Letter thus told X followers to “buckle up for a wild week ahead.”

“Nvidia earnings and PCE inflation in the same week make for great trading conditions,” it wrote. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_6

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_6

Fed target rate probabilities. Source: CME Group

PCE comes at a time when markets have baked in 100% odds of an interest rate cut in mid-September while also giving increasing credence to this cut being more than the minimum 0.25%.

The latest data from CME Group’s FedWatch Tool puts the odds of a 25-basis-point and 50-basis-point cut at 61.5% and 38.5%, respectively.

“Rate cuts are confirmed for Sep but there was no indication on how much, so August Payrolls will be critical,” trading firm QCP Capital wrote in an update to Telegram channel subscribers over the weekend.

“A 25bp cut is likely to be bullish, while a 50bp cut could indicate the Fed is taking acute action to prevent the economy from falling flat.”

Mining difficulty set to resume uptrend

Bitcoin network fundamentals show signs of an about-turn after testing conditions over the past month.

The latest estimates from monitoring resources BTC.com and MiningPoolStats show the mining sector forging a path higher despite reports of a profitability squeeze.

Mining difficulty, which dropped by 4.2% at its last automated readjustment, is set to recover by 2.8% this week.

This will leave the metric inches from a new all-time high, canceling out the effects of the early-August BTC price slump below $50,000. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_7

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_7

Bitcoin network fundamentals overview (screenshot). Source: BTC.com

At the same time, raw hashrate readings suggest an uptrend still firmly in place for the processing power dedicated to mining, with a new all-time high spike recorded on Aug. 23. This totaled 774 exahashes per second (EH/s), with known pools contributing 682 EH/s. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_8

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_8

Bitcoin hashrate raw data (screenshot). Source: MiningPoolStats

Earlier, Cointelegraph reported that despite miner sales tailing off in recent weeks, their overall impact on BTC price action has become dwarfed by institutional investment forces.

Short-term BTC holders distribute $10B in a week

Bitcoin’s short-term holders (STHs) have distributed coins to the market over the past week as prices recover.

Data from onchain analytics platform CryptoQuant shows that the week-on-week net position change for the STH cohort was more than $10 billion lower as of Aug. 25.

“This indicates an increase in selling by STH,” contributor Amr Taha wrote in one of the platform’s Quicktake blog posts, referencing a chart by fellow analyst Axel Adler Jr. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_9

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_9

Bitcoin STH net position change (screenshot). Source: CryptoQuant

STH entities are those hodling a given amount of BTC for 155 days or less, and correspond to the more speculative end of the Bitcoin investor spectrum.

Recent BTC price volatility hit the cohort hard, with mass selling at a loss recorded into the six-month lows on BTC/USD.

Now, the STH aggregate cost basis is in focus as a potential line of support should a new price dip begin.

The combined STH cost basis currently stands at $63,600, per data uploaded to X by investment firm MS2 Capital.

Among the speculators, those hodling for up to a month have a lower cost basis of between $60,000 and $62,000. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_10

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_10

BTC/USD 1-day chart. Source: MS2 Capital/X

Crypto launches higher from brink of "extreme fear"

Perhaps unsurprisingly, last week’s BTC price recovery had an instant effect on crypto market sentiment.

This is reflected in the Crypto Fear & Greed Index, which has more than doubled its readings in a matter of days—from 26 100 on Aug. 21 to 55 100 at the time of writing.

The sentiment shift to which that change corresponds suggests that the average crypto investor’s mindset has gone from the verge of “extreme fear” to knocking on “greed.” BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_11

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_11

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The recovery is echoed by a CryptoQuant metric dedicated to Bitcoin futures market sentiment. This narrowly avoided a trip to “extreme fear” in August. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_12

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_12

BTC futures sentiment index (screenshot). Source: CryptoQuant

Source: Cointelegraph

Risk Warnings and Disclaimers

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Warren Takunda

Economic

An expected U.S. interest rate cut next month is unlikely to help the overvalued Indian rupee, even as its emerging market peers gain, bankers said.

The rupee was nearly flat on Monday after Federal Reserve Chair Jerome Powell on Friday endorsed an imminent start to rate cuts.

The move was in line with the rupee's recent underperformance as the currency has failed to gain from the dollar's broad slump.

The Indian currency has weakened slightly this month, despite a more than 3% drop in the dollar index.

Meanwhile, peers Brazilian real, Thai baht, Indonesian rupiah and Malaysian ringgit have climbed about 5%.

India's central bank will likely welcome the underperformance as the rupee's real effective exchange rate (REER) - a measure of its competitiveness - rose to a near 7-year high last month.

The rupee's 40-currency REER was at 107.3 in July, signaling that the rupee was overvalued by about 7%, according to the Reserve Bank of India's latest monthly bulletin.

The overvaluation means the Reserve Bank of India will likely prevent a large appreciation in the rupee's exchange rate.

"Despite broader USD weakness, the Reserve Bank of India has been keeping the currency stable. In our view, this provides an opportunity for the REER to come down," Akshay Kumar, head of global markets at BNP Paribas India, said.

Indian Rupee Likely to Miss Fed Pivot-Fueled Emerging Market Rally_1

"From a policymaker's perspective, the higher (REER) reading would be a risk to India's export competitiveness," private lender HDFC Bank said in a note.

India's merchandise trade deficit jumped to a 9-month peak in July, hit by sluggish exports.

The rupee has declined 0.7% this year and was quoted at 83.88 to the U.S. dollar at 2:00 p.m. IST.

There is "little chance" of the rupee rising past 83.50, a senior trader at a public sector bank said.

The RBI had bought dollars near that level in July and was likely to do so again, he said.

Analysts have retained their negative outlook on the rupee even as bullish bets on most Asian currencies rose in August, according to a Reuters poll.

Indian Rupee Likely to Miss Fed Pivot-Fueled Emerging Market Rally_2

Asian currencies' performance against US dollar over 2024

Source: Reuters

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Danske Bank

Economic

‘The time has come for policy to adjust, and the direction of the travel is clear’ said Federal Reserve (Fed) Chair Jerome Powell at his Jackson Hole speech on Friday. He didn’t give any guidance regarding the size of the coming rate cut despite speculation of at least one jumbo rate cut before the end of the year. Instead, he kept the door open for large cut bets. ‘The pace of rate cuts will depend on the incoming data, the evolving outlook and the balance of risks’ he said.

And Chicago Fed’s Governor Goolsbee said that it’s time to pay more attention to the employment side, making it clear for everyone that – as the inflation side seems to be under control – the developments in the employment leg will determine the size of the cuts. And the employment data of late has been weak – no alarmingly weak just yet but weak enough – to keep the doves in charge of the market after Powell’s dovish speech last Friday. The US yields and the US dollar index further dived. The yields and the dollar are now waiting impatiently next week’s jobs data update – as the jobs data gains importance after a long focus on inflation.

But before that, we will be watching the US GDP update this Thursday and the core PCE index – the Fed’s favourite gauge of inflation on Friday. The US GDP is expected to have rebounded to 2.8% in Q3, from 1.4% printed a quarter earlier. But Atlanta Fed’s GDP Now index suggests that the Q3 growth may be slower than that – around 2%.

The expectation of a 50bp cut has been rising slowly but surely. And the risk assets are surfing on that vibe in the absence of a major stress. The S&P500 and Nasdaq extended gains by more than 1% and the Russell 2000 index jumped more than 3% on Friday. I remain convinced that a 25bp cut is the right dose of dovishness to help keep appetite intact in the stock markets.

In the FX, the US dollar’s further dive pushed the EURUSD to 1.12 on Friday, but the pair sees resistance at this level in Asia this morning, and I still believe that the euro’s recent surge is overdone against the US dollar and a correction would be healthy at the current levels. This week, the Eurozone countries will be releasing their preliminary CPI numbers for August and the expectations are weak. EZ headline inflation may have eased from 2.6% to 2.2%, while core inflation is still seen a bit sticky slightly below the 3% mark. But inflation in Europe seems to be in check as well – a situation that should allow the European Central Bank (ECB) to continue cutting the rates. European economies need the rate cuts more than the US does, but the ECB is expected to cut by 50bp before the year ends vs 100bp cut expected for the Fed. Hence there is a growing room for a dovish adjustment for the ECB expectations.

Finally, crude oil gained on Friday along with risk assets, and bulls are joining in this morning on news that Israel has declared a 48-hour state of emergency after launching a pre-emptive strike on Hezbollah sites in Southern Lebanon, in anticipation of a response to last month’s assassination of its military chief.

Nvidia reports on Wednesday

Nvidia earnings are due after the Wednesday’s closing bell, and the expectations remain sky-high. The company has pointed at $28bn sales in Q2 when it released earnings last quarter – double the amount it made a year earlier, and the market consensus is around $28.7bn.

Although the worries regarding the Big Tech’s big AI spending have been mounting as the AI investments haven’t yet improved the company profits just yet (except at Meta), the big AI spenders like Meta and Google who account for 40% of Nvidia’s revenue said that they’d rather overspend in AI than underspend to make sure not to miss the decisive AI turn. Hence, Nvidia could announce another blowout quarter. But Nvidia cannot afford any missteps at current valuations. Everything from the numbers to guidance should be perfect the keep the rally going. And this is where, the rising competition and impatient investors – who could force the big spenders to spend less on AI – become growing challenges.

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IFO

Economic

Data Interpretation

On August 26, the ifo Institute for Economic Research published the German business survey data for August:

The German ifo Business Climate Index fell to 86.6 in August from 87 in July, compared with the expected 86.

The German ifo Current Business Situation Index dropped to 86.5 in August from 87.1 in July, in line with expectations.

The German ifo Business Expectations Index declined to 86.8 in August from 86.9 in July, compared with the expected 86.5.

The report shows that the sentiment among companies in Germany is on a downward trend. The ifo Business Climate Index fell from 87.0 points in July to 86.6 points in August, the lowest level since since February 2024. Companies assessed their current situation as worse. In addition, expectations were more pessimistic. The German economy is increasingly falling into crisis.

In manufacturing, the index fell considerably. Companies were significantly less satisfied with the current business situation. Expectations fell to the lowest level since February. Companies once again reported declining order backlogs. The situation for investment goods manufacturers, in particular, is difficult.

In the service sector, the business climate deteriorated. This was due in particular to skeptical expectations. In addition, the current business situation worsened somewhat.

In trade, the business climate rose slightly after declining two times in a row due to the somewhat less pessimistic expectations. Traders were, however, less satisfied with the current business situation. In construction, the index was unchanged. On the one hand, companies were slightly more satisfied with the current business situation. On the other, their expectations declined slightly.

German Ifo Business Survey

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S&P Global Inc.

Economic

US core PCE, eurozone inflation and China PMI highlights

Inflation readings out of the US and eurozone will be the highlights in the coming week as the market seeks near-term rates guidance. GDP updates will also be eagerly awaited, notably including from the US, Canada, Germany and India. A more up-to-date indication of economic conditions in mainland China will meanwhile be provided by the NBS PMI.

The attention turns back to economic data post the Jackson Hole Symposium, with July's US core PCE data to be especially keenly assessed. This follows prior CPI indications of softening inflationary pressures in the US, while the latest August flash PMI further showed that selling price inflation dipped to a seven-month low to hint at lower readings across official inflation gauges in the coming months. An easing inflation trend, alongside a weakening jobs trend in August (according to flash PMI data) are expected to be supportive of the Fed lowering rates, given recent FOMC meeting minutes showed members were generally supportive of a cut if the data behaved. Uncertainty regarding the size of the September cut remains, but signs of still-solid growth conditions observed via the latest flash PMI err towards 25 rather than 50 basis points. Additionally, the US also updates consumer confidence, personal income and spending data that will help shape the inflation picture and thereby steer monetary policy expectations for the market.

Over in the eurozone, preliminary August inflation figures will also offer insights into the European Central Bank's path forward as expectations gather for a September rate cut. The HCOB Flash Eurozone PMI signalled falling cost inflation, notably in the keenly-watched services sector where the input prices gauge hit a 40-month low.

Following the release of August flash PMI data for major developed economies and India, mainland China's PMI from the National Bureau of Statistics will be due over the weekend ahead of worldwide manufacturing and services PMI releases at the start of September. Growth and inflation conditions updates will be key as central bankers around the world contemplate rate cuts in line with the trajectory expected for the US Fed.

Flash PMI surveys bring (qualified) good news

Flash PMI data for August from S&P Global brought some encouraging news on developed world economic growth midway through the third quarter. A sustained robust expansion was seen the US, with growth also accelerating to solid rates in both the UK and Japan. Even the struggling eurozone reported an improved rate of growth, albeit still lagging behind. Measured across the G4 largest developed economies, output growth accelerated to the second fastest seen over the past 15 months.

Beneath the surface, however, the PMI data send some warning signals that growth is not as healthy as it seems. First, manufacturing is looking increasingly weak, as output fell sharply across the G4 as a whole amid slumping trade flows to leave growth dependent on the services economy. The latter saw August's expansion flattered in part by increased activity around the Olympics in France. Worryingly, backlogs of orders in the service sector fell across the G4 at the sharpest rate for eight months and future output expectations hit a nine-month low.

It's possible therefore that weakness from manufacturing will spread to services, though there is hope that lower interest rates will spur demand to help support the expansion. In this respect, the flash PMIs generally brought encouraging news, especially in relation to service sector inflation, the stickiness of which has been the greatest concern to policy hawks. Across the G4 economies, average prices charged for services rose at the slowest rate since December 2020, the rate of increase most notably cooling in the US to help open the door further for the FOMC to start cutting interest rates.

Key diary events

Monday 26 Aug:UK, Philippine Market Holiday;Thailand Trade (Jul);Singapore Industrial Production (Jul);Germany Ifo Business Climate (Aug);United States Durable Goods Orders (Jul);United States Dallas Fed Manufacturing Index (Aug).

Tuesday 27 Aug:China (Mainland) Industrial Profits (Jul);Germany GDP (Q2, final);Mexico Trade (Jul);United States S&P/Case-Shiller Home Price (Jun);United States CB Consumer Confidence (Aug);United States Richmond Fed Index (Aug).

Wednesday 28 Aug:Australia Monthly CPI Indicator (Jul);Germany GfK Consumer Confidence (Sep);France Consumer Confidence (Aug);France Unemployment Benefits Claims (Jul).

Thursday 29 Aug:New Zealand ANZ Business Confidence (Aug);Spain Inflation (Aug, prelim);Eurozone Economic Sentiment (Aug);Spain Business Confidence (Aug);Germany Inflation (Aug, prelim);United States GDP (Q2, second estimate);United States Wholesale Inventories (Jul, adv);United States Pending Home Sales (Jul).

Friday 30 Aug:South Korea Industrial Production (Jul);Japan Unemployment Rate (Jul);Japan Industrial Production (Jul, prelim);Japan Retail Sales (Jul);Australia Retail Sales (Jul);Thailand Industrial Production (Jul);Japan Consumer Confidence (Aug);Japan Housing Starts (Jul);France Inflation (Aug, prelim);France GDP (Q2, final);Germany Unemployment Rate (Aug);Italy Unemployment Rate (Jul);United Kingdom Mortgage Lending and Approval (Jul);Eurozone Inflation (Aug, flash);Italy Inflation (Aug, prelim);India GDP (Q2);Canada GDP (Q2);United States Core PCE Price Index (Jul);United States Personal Income and Spending (Jul);United States Michigan Consumer Sentiment (Aug, final);Saturday 31 AugChina (Mainland) ;NBS PMI (Aug).

What to watch in the coming week

Americas: US Q2 GDP, core PCE, durable goods orders, home prices, consumer confidence, personal income and spending data; Canada Q2 GDP

Second quarter GDP data will be released in both the US and Canada, with the former following the initial 2.8% estimate. In Canada, a better performance is forecasted for the second quarter with PMI data having alluded to a higher Q2 average, though the more up-to-date July data signalled some weakness into the start of the third quarter.

US core PCE, the Fed's preferred inflation gauge, will also be updated for July amid increasing market hopes that tamed inflation will enable the Fed to lower rates in September. Besides which, the series of official releases including personal income and spending, durable goods orders and consumer confidence, will be scrutinised and assessed for insights into how much the Fed will lower rates at the September meeting.

EMEA: Eurozone inflation; Germany inflation, Ifo, GfK surveys, UK mortgage lending

Preliminary August inflation figures from the eurozone will be due Friday. This follows the August HCOB Flash Eurozone PMI which showed an easing of easing cost inflation, the softest in eight months, most notably in the service sector.

Germany also updates its preliminary August CPI data, in addition to the Ifo Business Climate and GfK Consumer Confidence data. The August HCOB Flash Germany PMI Future Output Index pointed to a slight easing of business confidence in the latest survey period amid deteriorating output and demand conditions.

APAC: Australia CPI; India Q2 GDP; Japan industrial production, unemployment rate and consumer confidence figures; China's NBS PMI data

In APAC, Australia releases its July CPI data, which are expected to show still-elevated inflation, albeit at a softer pace than June. The latest August Judo Bank Flash Australia PMI meanwhile showed a further cooling of selling price inflation, but rising cost inflation continued to pose a risk for the inflation outlook.

India's GDP for the April to June quarter will be due Friday. A slightly softer, but still substantial, growth rate has been signalled by the HSBC India PMI data, with the latest flash data further showing that the Indian private sector economy continued to thrive in August.

Additionally, key Japan data including industrial production and retail sales will be watched, while PMI data from mainland China's National Bureau of Statistics (NBS) will also be updated over the weekend.

To stay updated on all economic events of today, please check out our Economic calendar

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