The following is an extract from S&P Global Market Intelligence's latest Week Ahead Economic Preview. For the full report, please click on the 'Download Full Report' link.

Download full report

Worldwide PMIs, US payrolls, Fed minutes and RBA meeting

The opening week for the second half of 2023 packs a multitude of economic data highlights including worldwide PMI figures plus US ISM data and monthly jobs report. On the central bank front, Fed minutes from the June meeting will be released and monetary policy meetings will be held in Australia and Malaysia. A series of inflation updates across the world will also be due while Japan's Tankan survey will be scrutinised for second quarter business conditions.

Concerns have surrounded a loss of growth momentum post the June flash PMI data from major developed economies, though some of these jitters have been calmed by improved consumer confidence and goods orders indicators for the US. This nevertheless reflects the challenges that the US Federal Reserve continues to face, balancing still-elevated cost pressures with resilient consumer confidence and service sector growth, as seen via the S&P Global Flash US Composite PMI. As such, one is expected to continue reading the tea leaves through June's Fed minutes in next week's release. Additionally, labour market data for June will also be due Friday. Any stronger-than-expected jobs and wage growth may well set the market on their heels.

Beyond the US, insights into global economic conditions will be drawn from the latest set of June PMI data. Sector PMI data will be especially important to watch for signs that consumer services growth appears to have peaked, signalling the slowdown of this key growth engine in the first half of 2023. Whether the goods producing sector may be able to pick up the slack or has further deteriorated will also be examined, with early signals anticipated from basic materials producers.

On central bank front, the Reserve Bank of Australia and Bank Negara Malaysia will be two central banks convening in the first week of July. Slowing inflation in Australia offered some hopes for the RBA to pause its rate hikes, though the meeting remains a 'live' one with chances of another rise. Further rate hikes in the second half have also not been ruled out by the market.

For now, a series of official inflation data for Indonesia, South Korea, Philippines, Thailand, Eurozone and Switzerland will keep the market informed on the latest price developments as we enter H2 2023.

Services PMIs to be main focus of inflation fight

All too often we see models based on manufacturing data which try to predict the path of economic growth or inflation. And, all too often, these models send misleading signals. In recent months, the problem has been using the recent collapse in manufacturing prices as a proxy for broader consumer price inflation. As we have been signalling for some time, but only recently coming to the fore in many discussions, in 2023 it is the service sector which has been playing the key role in sustaining elevated inflation rates.

The benefit of manufacturing data such as monthly production and producer price statistics is typically its broad availability and it long-time history, often spanning many decades. Comparable data for the service sector to use in models, on the other hand, are harder to find. A notable exception is the PMI surveys, for which output, demand, input cost and selling prices data are available for all major developed and emerging economies.

Our in-depth analysis of recent service sector price trends have indicated that wage costs have been the principal driver of higher prices. But we are also seeing signs that demand for services is starting to weaken, which will reduce pricing power (see special report).

These service sector surveys will be updated for June in the coming week and will play a major role in steering policy guidance on the stickiness of inflation.

Key diary events

Monday 3 Jul
US (partial), Canada Market Holiday
Worldwide Manufacturing PMIs, incl. global PMI* (Jun)
Japan Tankan Index (Q2)
Australia Building Permits (May, prelim)
Indonesia Inflation (Jun)
Switzerland Inflation (Jun)
Hong Kong SAR Retail Sales (May)
Singapore SIPMM Manufacturing PMI (Jun)
United States ISM Manufacturing PMI (Jun)

Tuesday 4 Jul
US Market Holiday
South Korea Inflation (Jun)
Australia RBA Interest Rate Decision
Germany Trade (May)
Canada S&P Global Manufacturing PMI* (Jun)

Wednesday 5 Jul
Worldwide Services, Composite PMIs, inc. global PMI* (Released across 5-6 July for June)
Philippines Inflation (Jun)
Australia Retail Sales (May, final)
Thailand Inflation (Jun)
Singapore Retail Sales (May)
Eurozone PPI (May)
United States Factory Orders (May)
United States Fed FOMC Minutes (Jun)

Thursday 6 Jul
Australia Trade (May)
Germany Factory Orders (May)
Malaysia BNM Interest Rate Decision
Taiwan Inflation (Jun)
Eurozone Retail Sales (May)
United States ADP Employment Change (Jun)
United States Trade (May)
United States ISM Services PMI (Jun)
United States JOLTs Job Openings (May)
Canada Trade (May)

Friday 7 Jul
South Korea Current Account (May)
Japan Household Spending (May)
Philippines Unemployment and Industrial Production (May)
Thailand Consumer Confidence (Jun)
Germany Industrial Production (May)
United Kingdom Halifax House Price Index* (Jun)
France Trade (May)
Taiwan Trade (Jun)
Canada Unemployment Rate (Jun)
United States Non-farm Payrolls, Average Earnings and Unemployment Rate (Jun)
S&P Global Sector PMI* (Jun)

* Press releases of indices produced by S&P Global and relevant sponsors can be found here.

What to watch

Worldwide manufacturing and services PMI for June

Following the release of June flash PMI for major developed economies, worldwide manufacturing and services PMI data will be unveiled at the start of July.

Flash PMI data at the mid-year indicated cooling inflationary pressures across the four largest developed world economies (the "G4"). While this represented a move in the desired direction of central bankers, it came at the cost of growth as business activity also expanded at a slower rate across the G4. Notably, alongside a broad manufacturing malaise, G4 service sector activity rose at the weakest pace since February with the eurozone seeing leading the slowdown in growth. It will be of interest to study if this trend is mirrored across emerging countries and the wider global economy. Global Sector PMI will also follow on Friday, July 7 for greater details on a sector level including across regions such as Asia, US and Europe.

Americas: US labour market report, Fed FOMC minutes

The US finds a busy economic calendar in the week ahead with June US labour market data and Fed minutes being highlights. Consensus expectations point to a still-solid expansion of around 200k for non-farm payrolls while the unemployment rate is expected to stay low at 3.7%. This is in line with indications from June S&P Global Flash US Composite PMI data. Further details from the June Fed meeting will also be scrutinised with the minutes to be released on Wednesday.

Europe: Germany trade and industrial production, eurozone PPI and retail sales

In addition to the detailed sector PMI data releases, a series of tier-2 data from the eurozone and Germany will be tracked in the coming week with a particular focus on eurozone's latest factory gate inflation figures. Also watch out for the UK Hallifax house price index for the latest news on residential property prices amid higher interest rates.

Asia-Pacific: RBA, BNM meetings, Japan Tankan survey, Indonesia inflation

In APAC, the Reserve Bank of Australia will convene on Tuesday with the possibility of another hike not ruled out. Japan's Tankan survey will meanwhile offer an update on business' views for Q2 after the latest June au Jibun Bank Flash Japan Composite PMI signalled continued expansion of Japan's private sector, albeit at a slower rate.

Special reports

Global pricing power sinks to 2½ year low as higher interest rates take their toll - Chris Williamson

South Korea continues to face headwinds from weak exports - Rajiv Biswas

Download full report

© 2023, S&P Global Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.

Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

Learn more about PMI data

Request a demo

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.