- German Ifo survey data to dip slightly for May’s current conditions index
- Softer growth for retail sales via the UK CBI Distributive Trades Survey for May
- Economists see new US home sales backtracking in April
Expectations for Germany’s economy are in focus today with the monthly update of the Ifo Business Climate Index for May. We’ll also see a fresh release of UK survey data for the retailing industry for May via CBI numbers. Later, the government will publish data on new US home sales for April.
Germany: Ifo Business Climate Index (0800 GMT): Economic growth is expected to downshift slightly, the Finance Ministry advised in its monthly update published on Monday.
"Favourable macroeconomic conditions such as brighter sales prospects at home and abroad, low interest rates as well as moderate energy prices suggest that the overall economic upturn should continue throughout the rest of the year, although with less momentum than in the first quarter,” the report explained.
Today’s Ifo sentiment data is also expected to provide a hint that the macro trend is levelling off and perhaps nudging down a bit. The benchmark that tracks current conditions is projected to dip fractionally for the first time in nine months easing to 120.8 for May, down from 121.1 in the previous month, according to Econoday.com’s consensus forecast.
The data that tracks expectations, on the other hand, is projected to tick up to 105.4 for May, touching a six-month high.
The main takeaway: moderate economic growth doesn’t look set to accelerate, but any loss of momentum will probably be minimal.
UK: CBI Distributive Trades Survey (1000 GMT): An early clue on the outlook for the May profile for Britain’s economy arrives today via the monthly release of survey data for the retail industry.
The report will be widely read in the wake of mixed numbers that suggest the macro risk is rising as the UK negotiates an exit from the European Union. One of the potential headwinds is UK Prime Minister Theresa May’s pledge to reduce the flow of immigration.
According to last week’s release of the Conservative manifesto, the government recommends reducing net migration “down to tens of thousands”. But that policy strikes analysts as ill-advised for an economy with an ageing population, labour shortages, and low productivity.
Global Future, a think-tank, advised recently that net migration of 200,000 a year – twice what the May’s Conservative party is proposing – is needed to “avoid catastrophic consequences for the economy”.
For the immediate future, the economy remains moderately bright, courtesy of an ongoing expansion. But the latest GDP growth estimate from the National Institute of Economic and Social Research (NIESR) points to a hefty downshift in the forward momentum.
Output increased by only 0.2% over the three months through April. It’s still early for second-quarter data, but NIESR’s analysis suggest that the economy is vulnerable to a softer trend vs. recent history. Official data shows that GDP increased 0.3% in Q1 and 0.7% in last year’s Q4.
Today’s CBI release offers a preliminary estimate for how the numbers are shaping up for May. The good news is that the index from the Confederation of British Industry is on track to remain in positive territory, which suggests that retail sales will continue to expand on a year-on-year basis.
Note, however, that TradingEconomics.com’s consensus forecast for the CBI Distributive Trades Index calls for a sharp drop to 10 in May from 38 previously, which implies that this month’s hard data on consumer spending could reflect weakness.
It’s already clear that growth in retail sales has decelerated. The question is whether spending is stabilising at a softer pace or destined for an ongoing slide? Today’s report offers a preliminary guesstimate.
US: New Home Sales (1400 GMT): Economic growth is widely expected to bounce back in the second quarter after a weak Q1. Will the housing market show a similar resilience?
Today’s April update on new home sales offers an early instalment on an answer. Economists, however, think that the appetite for newly built houses will remain in the relatively narrow range that’s prevailed for much of the past year.
Sales perked up to a seasonally adjusted annualised rate of 621,000 in March, close to last July’s 622,000 – the highest since the recession ended. Today’s release for April, however, is on track to stall, with new-home sales easing to 604,000.
Stepping back and reviewing the numbers for sales in recent years still points to a healthy trend, albeit one that’s been in limbo lately. An uptick in interest rates doesn’t help, although that’s only a marginal headwind so far.
Whatever’s keeping sales in check is expected to remain in force for today's April update. But with economic growth on track to revive, it’s still reasonable to assume that new home sales will reach a new post-recession high later this year.
Disclosure: Originally published at Saxo Bank TradingFloor.com