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The week ahead

The upcoming week delivers critical economic insights emphasising US employment dynamics, Chinese manufacturing health, and European inflation trajectories. Employment data dominates the US calendar, including Job Openings and Labor Turnover Survey (JOLTS) findings, ADP employment figures, and the closely monitored non-farm payrolls report, providing essential labour market insights.

May’s US labour market added 139,000 jobs under non-farm payrolls. While exceeding expectations, this represented deceleration from April’s 147,000, though unemployment remained steady at 4.2%. Markets anticipate 129,000 June job additions with unemployment expectations unchanged at 4.2% for the fourth consecutive month. However, downside risks to non-farm payroll figures exist given weakness in continuing and initial jobless claims data.

The European Central Bank (ECB) Forum on Central Banking convenes in Sintra from 30 June to 2 July, providing platforms for policymaker, academic, and financial professional dialogue. Subsequently, European inflation data for June will assess whether regional disinflation trajectories remain intact, raising questions regarding potential eurozone policy adjustments.

Previous purchasing managers’ index (PMI) data revealed pronounced deterioration in China’s manufacturing sector. Both National Bureau of Statistics (NBS) and Caixin PMI readings fell below the critical 50 threshold in May, signalling sector contraction amid weakening foreign demand. While services demonstrated modest expansion, this failed to offset manufacturing downturns. Survey findings highlighted intensified business competition placing additional downward pressure on pricing.

We anticipate potential improvements in this week’s figures, with manufacturing PMIs expected to recover above 50 while services PMIs should maintain modest expansion. Recovery drivers may include recent constructive US-China trade discussions in London potentially catalysing renewed foreign demand, and the 618 online shopping festival could provide domestic consumption support. Key metrics to watch include input costs and output pricing indices, offering insights into whether China’s persistent deflationary pressures are beginning to ease.

Figure 4: China’s PMI data