The Week Ahead: Earnings from Micron and Costco; US PCE Inflation and CA GDP in Focus

Last week saw a return to rate cuts, with the Federal Reserve implementing its first 25 basis point reduction in 2025, and the Bank of Canada lowering rates once more after a pause of three meetings. This proactive strategy to bolster the economy, despite continued high inflation, was positively received by the markets.

This week, the spotlight will be on significant economic releases, including Canadian GDP figures and a range of U.S. data covering inflation, consumer activity, housing, and overall economic growth trends. On the corporate front, Micron and Costco are among the leading companies scheduled to report their earnings this week.

As the earnings season draws to a close, a handful of companies are still set to release their financial reports.

In the US, analysts note that while the target for core PCE inflation is typically 2%, current expectations are centered around a higher figure. Anticipated year-on-year and month-over-month readings for this core benchmark suggest a slight increase, which may not sit well with the market. Consumer spending data expected in the coming week appears robust. However, some softer data in durable orders and home sales, along with Fed officials defending their easing strategy, might provide some balance for more cautious market participants.

In Canada, the sharp decline in Q2 GDP was partly due to exporters accelerating shipments to the US in Q1 to avoid potential tariffs. Monthly GDP figures for July and preliminary data for August are expected to indicate a partial recovery in Q3, though not enough to fully offset the previous quarter's dip. Consequently, the Bank of Canada is likely to proceed with a planned rate cut in October, despite July's figures slightly exceeding expectations.