- A second month of growth is expected for the Eurozone Retail PMI in January
- The Sentix Index will give a fresh read on investor sentiment for the Eurozone
- The macro trend in the Eurozone has accelerated in recent weeks
- US Labour Market Conditions Index should reaffirm the upbeat news on payrolls
The Eurozone’s economic recovery remains in focus today with two survey updates, starting with the Retail PMI report for January. We’ll also see new figures for the Sentix Investor Confidence Index. Later, the Federal Reserve publishes its US Labour Market Conditions Index for January.
Eurozone: Retail PMI (0910 GMT): Consumer spending in Europe is expected to post mild growth for a second month in January, according to TradingEconomics.com’s econometric projection for today’s Retail PMI report.
The upbeat outlook follows news in recent weeks that the macro trend in the Eurozone has accelerated, which suggests that a degree of recovery for retail spending is a reasonable forecast. The Euro-Coin Indicator, a proxy for GDP, rose to an estimated 0.68% quarterly gain for last month -- the highest in nearly seven years.
Is that a clue for thinking that retail spending will accelerate too? Today’s update offers a fresh review on what to expect. Meantime, the hard retail data has been lacklustre lately. Although sales remain positive on a year-over-year basis, the trend eased in November to a 2.5% gain. Meanwhile, the monthly comparison fell back into negative territory after a one-month gain October.
The outlook is improving, however. TradingEconomics.com’s econometric forecast for the Retail PMI in January calls for a fractionally higher reading of 50.8. Although that’s just barely above the neutral 50 mark, the projection anticipates the first set of back-to-back positive readings in recent history.
Eurozone: Sentix Investor Confidence Index (0930 GMT): Today’s report that monitors the mood in the investment community offers another data point for evaluating the outlook for the Eurozone economy.
The current rebound, in fact, was anticipated by the Sentix Investor Confidence Index, which has been rising persistently since August, albeit with one temporary setback in December. But last month’s data rebounded sharply, rising to the highest level since August 2015. The strong increase convinced the managing director at Sentix, a consultancy, to advise that the dramatic improvement implies that the macro trend will pick up.
That’s also the message in last week’s estimate for GDP growth in this year’s first quarter via Now-casting.com. The firm projects that output will accelerate to 0.8%, up from 0.5% in last year’s Q4.
The Eurozone Composite PMI for January also paints a bright profile. IHS Markit reported on Friday that “the Eurozone economy made a strong start to 2017, with output growth maintained at December’s five-and-a-half year high and job creation accelerating to a near-nine year record.”
In the wake of the upbeat numbers, it would be surprising if today’s Sentix data presents a conflicting narrative. Note, however, that Investing.com predicts a slight decline to 17.4 for the February projection from 18.2 previously. But that looks like noise rather than a break with the rising trend of late.
US: Labour Market Conditions Index (1500 GMT): Jobs growth picked up sharply in January, surging by 227,000 from a modest 157,000 gain in the previous month. Is this a sign that the labour market’s trend is on track to strengthen in 2017 after a mixed run last year?
It’s too soon to know for sure, but Friday's news certainly lifted expectations. “I think the breadth of the job gains, in addition to the size, is encouraging,” noted the chief economist at PNC Financial Services Group.
Today’s broader read on the trend may shed more light on looking ahead. The Fed’s multi-factor Labour Market Conditions Index dipped back into negative territory in December – the first sub-zero reading in seven months.
But the strong pop in payrolls for January suggests that LMCI will rebound too. Unsurprisingly, that’s what TradingEconomics.com is projecting. The website’s econometric estimate calls for a solid rise to 1.0 for January from -0.3 in the previous month. If the forecast holds, the news will strengthen the view that companies remain on track to hire workers at a healthy pace in the months ahead.
Disclosure: Originally published at Saxo Bank TradingFloor.com