This week’s economic calendar should feature a healthy dose of US macro data amidst a sprinkling of Fed speak. However, with the risk of a federal government shutdown high, there is a significant chance that this week’s main event, Friday’s September employment report, could be delayed. Federal government statistical releases will likely be delayed in the event that Congress is unable to reach agreement on a short-term funding resolution by midnight September 30. Data releases from the BLS, BEA, and Census Bureau would be postponed for the duration of a shutdown. This would include the September employment report (scheduled for 3 October) and CPI (15 October), as well as retail sales and PPI. We would continue to receive labor market updates from the weekly jobless claims data, the ADP employment report, and surveys from ISM, PMI, and regional Federal Reserve banks. The economic impact of a shutdown would likely be modest, with past episodes suggesting a drag of 10-20bp per week on Q4 annualized GDP growth. Our own estimate is .13bps per week. The Trump administration has threatened to lay off federal workers in the event of a shutdown. This would be in addition to the large drag from deferred resignations earlier in the year (ending in Sep’25 and likely to come into Oct NFP). Previously we were expecting a -ve NFP in Oct to the tune of -25k but it could increase further if the shutdown carries on for more than 2 weeks. The highlight of this week's US macro data is NFP for Sep which we expect at 60k against current consensus of 50k. The higher expectation is more because of seasonality. We expect UR at 4.3% with upside risks if LFPR shifts higher. We expect AHE at .2% MoM. In other US macro data we get JOLTs, ISM manufacturing & services & consumer confidence. We believe US economy has been propped up by AI capex. The 1.6% average QoQ SaaR growth of H1CY25 when seen with a 4.3% unemployment rate implies that the wedge between hours worked and output is productivity, which could well hit 4% in the nonfarm business sector. Q2 GDP data showed strong upswing in consumption which is in contrast with weak employment. The Q2CY25 spending rise has exceeded growth in both labor income and total disposable personal income. On a 3m/3m basis, real spending rose 2.4% saar in August, vs. 1.0% for wages and -0.2% for DPI. Both nominal and real wage growth over this period is the slowest it has been in two and a half years. And the saving rate, exempting a brief one-off dip last December, is the lowest since the end of 2022. We don’t expect this situation to persist indefinitely, leading us to forecast that spending growth will slow later this year. Hence, we continue to believe that we might see front loaded rate cuts by Fed to the tune of 100 bps total in the next 4 meeting till Q1CY26 bringing us to a terminal rate of 3%. In RoW data, we have Eurozone HICP data this week. We see euro area HICP inflation to rise by 20bp to 2.3% y-o-y in September. We believe core goods price momentum is likely to ease, while services price momentum is likely to be broadly in line with that in September 2024. The uptick in headline HICP inflation is largely owing to a rise in energy prices (driven by liquid fuels) and energy price base effects. In Japan we have the BOJ Tankan Survey on Wednesday. We expect Tankan survey to show resilient business sentiment, reinforcing the case for the Bank of Japan to hike in it's Oct meeting by 25 bps.
