Week Ahead

Last week saw confirmation of the size of the fall in output with the economy contracting 20.4% Q/Q in Q2, although moving off the April lows a little in both May and June. Our preferred labour market statistic, hours worked, fell back further to 849mln for the three months to June, the lowest level since November 1994. With lockdown still in almost maximum effect through June, this should reflect the nadir.

The upcoming week will see more volatile but more timely data released.

• Inflation data on Tuesday is unlikely to be market moving for anything other than linkers with the BoE unlikely to react to any near-term surprises.
• Retail sales on Thursday will give us the best indication yet of the state of consumption in July. The early economic consensus is only looking for a 0.2% M/M gain for the ex-fuel measure which might seem a little low given the "Super Saturday" lockdown reversals seen on 4^th July.
• Public sector finance data will be released simultaneously which is unlikely to be immediately market moving unless there are huge surprises but will still be watched by the gilt market as an indication of the evolution of supply.
• Thursday will also see flash PMI data released for August. These will be interesting to watch as local lockdowns in the North West, quarantines on returning travellers from Europe and a generally worsening of the Covid picture across Europe potentially impact the numbers. The early consensus looks for numbers largely unchanged from those seen in July.

There are no scheduled MPC members speaking this week.

For our full run down of the week ahead including auction previews, cash flow matrix, QE trackers and calendars see the Gilt Week Ahead here.