Thursday’s a busy day for economic news, including the European Central Bank's policy announcement at 1145 GMT, followed by a press conference at 1230 GMT. A few hours ahead of the ECB events we'll see the hard-data release for Eurozone retail spending in July. Later, two US reports will be widely read ahead of tomorrow’s influential jobs report from Washington. First up is the weekly numbers on jobless claims, followed by the first look at the ISM Non-Manufacturing Index for August.
Eurozone: Retail Sales (0900 GMT): The market’s looking for a rebound in retail spending for the Eurozone in July. That’s a reasonable outlook, according to Markit’s July purchasing managers’ index (PMI) for the retail sector. Indeed, the PMI read for the industry rose sharply at the start of the third quarter, touching its highest level in four years in July.
A Markit economist noted in a press release last month that “July’s retail PMI showed sales growth accelerating sharply as levels of trade rose across Germany, France and Italy.”
The PMI data is a strong clue for expecting good news in today’s hard data on spending from Eurostat, the statistical agency for the Eurozone. Although the recent market turmoil raises concerns that Europe’s modest recovery may be vulnerable to global shocks in the months to come, the numbers on retail spending will ease worries, if only slightly.
The skeptical view of the recent improvement in consumer spending is a familiar issue, namely, Germany continues to be the main driver of growth. True, but there’s also some improvement bubbling elsewhere — Spain, in particular, which has already reported that retail sales in July rose the most since April.
Meanwhile, we learned earlier this week that Eurozone unemployment ticked lower, to 10.9% in July, in part due to a robust decline in joblessness in Italy. Although the jobless rate is still dangerously high for the continent overall, the latest dip is encouraging as it leaves unemployment at its lowest level in more than three years.
A marginal improvement, to be sure. But the fact that progress in any degree remains intact implies that there’s still a positive tailwind blowing, a tailwind that looks set to receive a bit more support in today’s release.
There’s still a surfeit of worry about when it comes to considering Europe’s macro trend in the near-term future. But for the moment, the retail sales data for the euro area is on track to dispense some upbeat numbers after a soft batch of figures for June.
US: Initial Jobless Claims (1230 GMT) Yesterday’s ADP estimate on private payrolls for August delivered upbeat news: US companies added 190,000 jobs last month. That was modestly below expectations, but it’s strong enough to encourage the view that the US will continue to post moderate growth for the near term.
The latest ADP release also implies that tomorrow’s official jobs report from Washington will provide encouraging numbers as well. Ditto for the recent run of weekly updates on jobless claims, which have been tracking close to 40-year lows in recent months.
Today’s update on new filings for unemployment benefits is expected to dispense more support for expecting a solid rate of growth in the labour market. Econoday.com’s consensus forecast calls for a small rise of 3,000 for new claims, ticking up to a seasonally adjusted 273,000. But that’s a rounding error for this typically volatile series.
The bottom line: if today’s report is effectively a yawn, with little movement one way or the other, we’ll have a fresh bit of data that points to a decent gain for August employment in tomorrow’s release.
US: ISM Non-Manufacturing Index (1400 GMT) :The manufacturing sector remains a weak corner for the US economy, and the latest numbers for August are no exception. The ISM Manufacturing Index dipped to a two-year low last month. Although the sector is still growing, according to the ISM figures, the expansion has become unusually weak.
Some of manufacturing’s troubles are bound up with the oil patch’s troubles, which are directly linked to an ongoing bear market in energy prices. In any case, manufacturing’s woes appear to be contained. One reason for thinking so is the upbeat numbers for the services sector, which is by far the more influential slice of US economic activity in terms of jobs, revenues and other key metrics.
Today’s August report on the ISM Non-Manufacturing Index will effectively offer a test of the theory that the weakness in manufacturing isn’t spilling over into the wider economy. Based on analysts’ projections, today’s release is on track to confirm that upbeat analysis.
Briefing.com’s consensus forecast sees the ISM services benchmark backtracking slightly in August, albeit after surging to a record high of 60.3 in July (based on data that begins in 2008). As such, today’s projected dip to 58.3 still leaves the index at a relatively high rate, which means that growth is still solidly in the black for the services sector.
That’s also a bullish narrative in Markit’s flash estimate of its Services PMI for August, which is scheduled for an update today at 1345 GMT, just ahead of the ISM release. The PMI data is moderately softer compared with the ISM reading for last month, but overall both benchmarks are in agreement: a solid expansion is still underway in the services sector.
The pace of growth may be set to cool a bit, but for the moment the general trend still looks encouraging and today’s updates aren’t likely to challenge that outlook.
Disclosure: Originally published at Saxo Bank TradingFloor.com