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We May Learn More This Week About Whether a Recession Is Coming

Simon Kennedy
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China Exempts Certain Products From Tariffs

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Whether a recession is brewing in the U.S. and world economies may become clearer this week as a wave of vital data is released globally.

It’s already been a busy weekend. The U.S. carried through its threat to slap tariffs on roughly $110 billion in Chinese imports. There were also fresh signs of the trade war hurting demand with China’s manufacturing purchasing managers’ index falling again and a slump in South Korean exports extending to a ninth month.

Thursday sees the release of PMIs from around the world, which may provide insight into how deep the manufacturing slump is and whether it’s infecting the services sector. Then on Friday the U.S. will publish its payrolls report for August with Bloomberg Economics predicting an increase of 195,000.

Such data will help inform the likes of Federal Reserve Chairman Jerome Powell and European Central Bank President Mario Draghi as they enter September planning for policy meetings at which they’re expected to deliver fresh monetary stimulus.

“U.S. GDP data show defensive posturing among businesses in the first half of the year, so the risk is that heightened uncertainty will lead to an even more aggressive pullback,” said Carl Riccadonna, chief U.S. economist at Bloomberg Economics. “This leaves consumers as the predominant engine of growth -- and so the focus in the near term turns to income generation in the monthly jobs report. If the household income trend is intact, then consumers will be well positioned to shoulder the load in the back half of the year.”

Here’s our weekly rundown of other key economic events and click here for more from Bloomberg Economics:

U.S. and Canada

Powell speaks in Switzerland on Friday just before Fed officials are set to go quiet. So this provides the last moment to inform investors about what the central bank is thinking. On Wednesday, regional Fed presidents John Williams, James Bullard, Charles Evans and Neel Kashkari will all speak and the central bank releases its Beige Book snapshot of the economy. Friday’s payrolls report wraps up the week.

Hiring Momentum Is Cooling

In Canada, the Bank of Canada holds a rate decision on Wednesday that’s expected to lay the groundwork for a cut after the federal election in October. An employment report comes Friday.

For more, read Bloomberg Economics’ full Week Ahead for the U.S.

Asia

The trade war will continue to reverberate and shape markets and the region’s economic outlook. Australia’s central bank is set to decide on interest rates on Tuesday although economists expect it to maintain its key rate at 1% while leaving the door open to further easing. The next day, second-quarter GDP numbers are due with Bloomberg Economics penciling in a slight weakening to 1.5%. On Friday, Japan posts household spending with economists anticipating its growth slowed in July.

For more, read Bloomberg Economics’ full Week Ahead for Asia

Europe, Middle East and Africa

Sweden’s Riksbank may scrap plans to raise interest rates when its officials gather on Thursday. Meantime, the mood music for the ECB’s own upcoming policy decision due on Sept. 12 will steadily increase in volume after hawkish members of its Governing Council last week signaled opposition to aggressive stimulus. A speech by ECB Chief Economist Philip Lane on Wednesday may guide investors before officials begin a pre-meeting blackout period. German factory orders and industrial production data on Thursday and Friday respectively will reveal whether the weakness of the second quarter persisted into July.

In the U.K., the PMIs will give a health check on the economy with a potential no-deal Brexit now just weeks away. The new government will detail its spending plans for the upcoming year on Wednesday.

Data on Monday will probably show Turkey’s economy contracted in the second quarter after the nation briefly exited its first recession in a decade in the first three months of the year. South Africa and Nigeria will report second-quarter GDP on Tuesday. The two largest economies in Africa, which account for about half the continent’s total output, continue to be a drag on the region’s expansion. Ukraine’s central bank may reduce rates on Thursday. The Bank of Russia will determine rates on Friday after two successive cuts: the median forecast is for another reduction of 25 basis points.

For more, read Bloomberg Economics’ full Week Ahead for EMEA

Latin America

Argentine politics will continue to influence its economic outlook as October’s presidential election nears and the debate over how to handle the nation’s debt swirls. Brazil’s industry output data for July, due on Tuesday, will be key to determine the speed of Latin America’s largest economy in the beginning of the third quarter, particularly after the industrial sector led GDP to expand twice as fast as expected in the second quarter. Even with a mild pick-up in growth, Brazil’s August inflation is expected to remain comfortably below target on Friday, making room for the central bank to keep lowering borrowing costs in September. Another central bank ready to further ease monetary policy is Chile’s, which is expected to deliver another 50 basis-point cut to its main rate on Tuesday, bringing it to 2%.

For more, read Bloomberg Economics’s full Week Ahead for Latin America

To contact the reporter on this story: Simon Kennedy in London at skennedy4@bloomberg.net

To contact the editors responsible for this story: Stephanie Flanders at flanders@bloomberg.net, Zoe Schneeweiss

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