- Eurozone's GDP expected to hold steady at 0.5% in today’s flash estimate for Q1
- US private payrolls on track to post sharply slower growth for April vs. March
- US ISM Non-Manufacturing Index set to tick higher, signalling moderate growth
The first estimate of Q1 GDP for the Eurozone will dominate today’s economic news in Europe. Later, two US numbers will be widely read for deciding if last week’s disappointing Q1 GDP report is a sign of things to come. First up is ADP’s estimate of private payrolls for April, followed by the ISM Non-Manufacturing Index for last month.
Eurozone: Q1 GDP (0900 GMT): European Central Bank head Mario Draghi last week said that the Eurozone’s economic trend is “increasingly solid". Will today’s first official estimate of first-quarter GDP provide hard data to support his analysis?
There’s widespread agreement that output will continue to rise at an encouraging rate, but there’s debate about whether the pace will pick up from 2016's Q4. The consensus forecast sees growth holding steady at 0.5% in Q1, according to Econoday.com – unchanged from the previous quarter, based on the latest figures from Eurostat, the Eurozone's statistics agency.
Two estimates from other sources, however, point to a slightly faster increase. The latest update via Markit’s Composite PMI anticipates Q1 growth at 0.6%. Now-casting.com also projects that growth will improve, printing at 0.65%.
Even if the pace holds at 0.5%, the news should be greeted with a cheer since it will confirm that the economy continues to recover. A minor milestone, perhaps, but one that seemed elusive just a couple of years earlier.
US: ADP Employment Report (1215 GMT): ADP’s estimate of private payrolls rarely matches the Labor Department’s number, but the March divergence was unusually wide. Meanwhile, last week’s first-quarter GDP release was surprisingly weak. In other words, the stakes are higher than usual for today’s April employment figures and the government’s labour-market update on Friday.
Economists expect that the number du jour will post a sharply softer growth rate relative to the strong gain that ADP reported for March. Econoday.com’s consensus forecast sees US companies adding 170,000 new jobs in April, well below the 263,000 advance in the previous month.
That downshift looks troubling, but note that the government’s guesstimate for private payrolls in April is expected to post a substantial rebound, rising 180,000 – double the gain vs. March’s increase.
There’s been a lot of volatility lately in employment data, but the trend appears on track to calm down when the dust clears at the end of the week. Taking the projections for the ADP and government releases at face value suggests that both data sets will be reporting moderate growth for private payrolls – 170,000 and 180,000, respectively – at the start of the second quarter.
If the forecasts are right, this week’s employment reports will suggest that the labour market is in no danger of overheating or falling off a cliff.
US: ISM Non-Manufacturing Index (1400 GMT): Markit’s PMI survey data has been signalling a slowdown in growth for the services sector, but today’s April report for the ISM Non-Manufacturing Index is expected to minimise any concerns that this corner of the US economy is stumbling.
Econoday.com’s consensus forecast calls for a fractionally higher reading: 55.8 vs.55.2 in March. That’s modestly below the levels in late 2016 and the first two months of this year, but the forecast still falls comfortably in line with a moderate-growth trend (any reading above 50 indicates growth). If the nudge higher holds in today’s release, the news will offer support for expecting that the US macro trend will remain positive at the start of the second quarter.
Nonetheless, the softer reading for the flash estimate of the competing Services PMI in April (released on April 21) suggests that economic activity faces headwinds. The index, although still positive, dipped to 52.5, a seven-month low.
How can we reconcile the two indices, each pointing to conflicting trends? Using the average is a reasonable answer. By that standard, moderate growth still looks like a persuasive forecast for services, which in turn implies that the US economy will rebound from the Q1 soft patch. But that relatively upbeat outlook could take a hit if today’s ISM data blindsides the crowd with an unexpected decline.
Disclosure: Originally published at Saxo Bank TradingFloor.com