The U.S. economy returns back this upcoming week with heavy fundamentals that will help shape the upcoming outlook, where data from the manufacturing sector in addition to the income report and the jobs report, while more U.S. companies will continue to announce their financial results. The Institute for Supply Management will release its manufacturing index for the month of July, where the ISM manufacturing is expected to show further deterioration in activities, where it seems that the manufacturing sector is losing momentum amid weak demand levels from domestic as well as global consumers. The income report for June is expected to show that personal income increased by 0.2%, while personal spending is expected to have risen by 0.1%, where this indicates that although income and spending levels are still weak, but they are improving though over a slow pace. Spending accounts for nearly two thirds of economic growth in the United States, and slowing spending levels should lead us to predict slower growth levels, where the economic recovery seems to be losing strength, as data recently suggested that activities started to deteriorate in several sectors including the manufacturing, the services, and the housing sector. Meanwhile, the income report is also expected to show that inflation remained stable throughout the month of June, where the Fed’s favorite gauge for inflation, core PCE, is expected to rise by 1.3%, unchanged compared with a year earlier. The Fed expects inflation to remain subdued over the course of the next two years at least, where elevated slack levels in economic activity continues to weigh down on prices, and accordingly, inflation will probably remain within the Fed’s 2% target for inflation. The ISM non-manufacturing (Services) index will be also released for the month of July, where the ISM services index is expected to show that activity continued to ease through July, as it seems that overall economic activity is easing indeed. Investors though will be focused later next week on data from the labor market, where the kick off will be with the ADP employment report. The ADP employment report is expected to show that private employers in the United States added 38,000 jobs in July only. The infamous jobs report which is due on Friday is expected to show that non-farm payrolls decreased by 98,000 jobs in July, compared with the prior reported 125,000 shed jobs in June, while the unemployment rate, which is a major concern for the future of the recovery, is expected to have risen in July to 9.6 percent from 9.5%. The Fed still expects unemployment to range by the end of this year between 9.2% and 9.5%, however, this is still considered relatively high, where elevated unemployment and tightened credit conditions continue to weigh down on overall economic activities, and unless unemployment starts to fall over a noticeable pace, the U.S. economy won’t be able to meet its long term growth potentials. Meanwhile, U.S. Corporations will continue to announce their financial results for the second quarter of this year, where so far, major corporations reported mixed results though most of the companies managed to announce results that topped estimates, yet some major companies also failed to meet estimates, and that provided investors with mixed sentiments over the outlook for stock markets. Accordingly, we should expect more fluctuations in over all financial markets, including stock, commodity, and currency markets. The U.S. dollar weakened generally last week, nevertheless, we should expect week full of fluctuations for the dollar given the importance of the data that will be released, while commodities including gold and oil should also follow the same path…

Source