BERLIN: German data in the coming week will show the cumulative impact of the Iran war, and it will set the stage for the government’s latest bid to awaken animal spirits in Europe’s biggest economy.
Factory orders, industrial production, and export numbers will showcase how manufacturing in a country that was formerly the engine of the region’s expansion fared during May, the third and final full month of the conflict.
Those reports coincide with a push by Chancellor Friedrich Merz for pro-growth reforms that will be presented to the Cabinet today to “break out of this slump in our economy”, as he put it last Thursday.
The package aims to provide momentum for businesses by pushing labour-market flexibility through looser fixed-term contract rules and tax-favoured severance payments.
Further efforts to cut red tape and accelerate planning and permitting are also designed to boost expansion.
Against that backdrop, the sustained Middle East ceasefire and a drop in oil prices offer another chance to catch the tailwind of its massive fiscal stimulus and recover lost ground in what Merz had previously dubbed Germany’s “year of growth”.
The Bundesbank’s forecast of 0.5% expansion for 2026 would amount to Germany’s best performance since the pandemic, with “considerable steam” seen gathering thereafter.
Even so, President Joachim Nagel insists the country can do much better.
“These are OK numbers, but there is more that we can do to really boost economic growth,” Nagel told Francine Lacqua on Bloomberg Television last Wednesday.
The week’s German data may offer a mixed picture.
Economists predict a rebound in factory orders today followed by unchanged industrial production tomorrow.
Export numbers on Thursday are forecast to show the first decline since January.
Inflation data on Friday, meanwhile, will confirm whether the initial estimate of 2.4% for June, which was lower than expected, did indeed transpire.
Elsewhere, minutes of the Federal Reserve’s (Fed) latest decision, an account of the European Central Bank’s rate deliberations, Chinese consumer-price numbers, and a probable interest-rate hike in New Zealand are among the highlights.
United States and Canada
It’s a relatively light data week in the United States, with highlights to include the Institute for Supply Management’s assessment of the service sector today, updated data on the US trade deficit tomorrow, and existing home sales on Thursday.
A bigger focus will be on the minutes of the Fed’s first policy meeting led by Kevin Warsh as chairman.
Investors want to see if his vow to shake up Fed communications extends to the minutes, after the central bank issued a significantly shorter policy statement following its rate decision on June 17.
Wednesday’s release will also be parsed for insight into the “good family fight” over rates, as Warsh dubbed it, and the chairman’s slew of new task forces.
Projections released after that meeting showed nine officials see at least one quarter-point rate hike this year.
Looking north, economists expect Canada to have added just 10,000 jobs in June and that its unemployment rate held at 6.6%, after a surprise hiring surge in May recouped some of the losses from earlier in the year.
Employment has been essentially flat since January as tariffs weigh on business investment and uncertainty around US-Iran relations clouds the outlook.
Against that backdrop, Canada’s trade surplus likely narrowed slightly to C$2.68bil (US$1.89bil) in May.
Meanwhile, the Bank of Canada’s business and consumer surveys will offer fresh insight into inflation and growth expectations.
Asia
It’s a big week for Asian inflation data, with Thailand, the Philippines, Taiwan and finally China set to report consumer prices.
The region’s highlight arguably comes on Wednesday, though, when New Zealand’s Reserve Bank is expected to hike its cash rate to 2.5% after the Monetary Policy Committee kept the benchmark steady in a split vote in May.
With the bank’s forecasts indicating the chance of two increases before year-end, the focus will be on when the next move might come.
Malaysia’s central bank is expected to hold its key rate steady for a sixth straight meeting the following day.
Reserve Bank of Australia Deputy Governor Sarah Hunter will give a speech.
Japan’s May wages data is on the agenda, closely watched as an important indicator for the Bank of Japan as it looks to hike rates again.
China, Hong Kong, Singapore, the Philippines and India will all release foreign reserves data.
Taiwan will release trade data for June, with the outcome likely to be similar to recent South Korean data, which showed the artificial intelligence (AI) trade is still booming.
Europe, Middle East, Africa
Following a week in which global policymakers worried aloud about potential market risks linked to AI, the Bank of England’s latest Financial Stability Report will be released tomorrow.
Sarah Breeden, the deputy governor in charge of that, speaks in New York two days later.
Euro zone policymakers will be out in force; a conference in Rome at the start of the week will feature several European Central Bank (ECB) speakers.
The account of the June meeting, when the ECB raised rates, arrives on Thursday.
Aside from the German factory numbers, other euro zone highlights include Italian industrial production on Friday.
In the Nordics, Norwegian inflation will be watched to see if predictions of a slight slowdown in the underlying measure materialize.
And in Russia, policymakers will watch for a continued slowdown when June consumer-price data are published on Friday, after a warning from the central bank that increased risks there may limit room for cuts in borrowing costs.
Latin America
Latin American central bankers will get their hands on June consumer price data as they work to slow inflation back to target while navigating a period of fuel cost swings caused by the Middle East conflict.
Fresh off a jumbo interest rate hike, Colombia will report price data tomorrow.
While economists expect monthly inflation to ease slightly, the annual rate is seen rising to 6.12%, which would be the highest in nearly two years.
Chilean consumer prices are expected to have fallen 0.3% on the month, driven by factors including a partial reversal of a massive fuel price hike implemented in late March.
The figures are due on Wednesday.
Finally, Mexico and Brazil will publish their consumer price figures on Thursday and Friday, respectively.
Also in Mexico, central bankers on Thursday will publish minutes of their June policy decision, when they halted a two-year easing cycle and signaled borrowing costs are likely to be left unchanged in coming meetings.
The same day, Peru’s central bank will likely hold its key rate steady at 4.25%, a level where it has remained since last September. — Bloomberg
