- Industrial production in Germany expected to weaken in March update
- Small-business optimism in the US is set for a mild rebound in April
- That would not be surprising, given recent strength in small-firm payrolls
- US job openings will be closely scrutinised after last week's soft NFP data
Industrial activity for Germany in March will be an influential report today for evaluating Europe’s macro outlook. Later, two US numbers will be closely read after last week’s disappointing news on payrolls for April.
First up is the monthly update on small business sentiment. Shortly after, the US Labor Department publishes new numbers on job openings for the final month in this year’s first quarter.
Germany: Industrial Production (0600 GMT): Factory orders bounced back in March for Europe’s largest economy, delivering a surprisingly strong monthly gain of 1.9% – well above the consensus forecast for 0.7%. Even better, the year-on-year trend perked up to a 1.8% increase, firmly ahead of February’s revised 0.7% annual rise.
Does the stronger data signal that the weak expansion of late for the German economy is poised for stronger growth in the second quarter? Some analysts are considering the possibility, including the chief economist at ING-Diba AG in Frankfurt.
The upbeat report for orders in March “give some hope that the stagnation since last summer is gradually fading away,” Carsten Brzeski told Bloomberg yesterday. “Interestingly, this pickup can mainly be attributed to foreign orders, suggesting that the cooling of activity might not be as severe as it seemed some months ago.”
Today’s March numbers on industrial activity will offer deeper context for evaluating Brzeski’s upbeat outlook. Be aware, however, that the crowd’s looking for a relatively subdued report.
February’s 0.5% monthly decline is on track for another setback in March, albeit a slightly softer one. Econoday.com’s consensus forecast sees Germany production dipping 0.4% in the final month of this year’s first quarter (seasonally adjusted).
The rebound in orders implies that better days lie ahead for output. Note too that survey data for the manufacturing sector turned higher in April.
Markit’s Germany Manufacturing Purchasing Managers’ Index ticked up to a three-month high last month, pointing to modestly stronger growth. As the press release from May 2 noted: New orders increased at faster pace, supported by the "sharpest rise in new export work since January."
That PMI data seemed to be a prelude to yesterday’s surprisingly solid data on factory orders for March. It’ll be interesting to see if there’s a repeat performance in today’s monthly release on industrial activity. Probably not, although the monthly comparisons may improve in the second quarter.
US: NFIB Small Business Optimism Index (1000 GMT): Economists are looking for a modest rebound in today’s April read on sentiment among small business owners. That’s a reasonable guesstimate based on the improvement in job growth among small firms lately.
Although the labour market’s growth has slowed lately on a national basis, firms with less than 50 employers have ramped up hiring lately. According to ADP’s estimates, payrolls perked up in March and April, rising at the best rates since December.
Despite the faster pace of hiring at small firms, sentiment in this corner of the economy has been inching lower this year, according to monthly data via the National Federation of Independent Business (NFIB).
In the March update, the group advised that business owners “remain very pessimistic about the economy”. Nonetheless, NFIB’s survey data for March revealed that “reported job creation improved”, albeit modestly so.
Today’s update on small business optimism generally is expected to show some improvement, which may not be surprising in light of the recent strength in small-firm payrolls.
Whatever the reason, Econoday.com’s consensus prediction calls for a mild uptick to 93.1 in NFIB’s sentiment index in April against just 92.6 in the previous month.
That’s hardly a clean break with the recent downshift. But if the mood ticks higher, so too will the odds that the recent gains in small business employment will roll on in the numbers for May.
US: Job Openings and Labour Turnover Survey (1400 GMT): The April downshift in employment growth for the US overall may be an early warning of trouble for the economy, but that risk receded slightly via the Federal Reserve’s broadly defined Labor Market Conditions Index. This multi-factor index remained negative last month, but just barely.
For the second month in a row, LMCI ticked higher, rising to negative 0.9 in April, the highest so far this year. Is that a hint that the recent soft patch in employment growth is due to rebound in the months ahead?
Perhaps, although a solid report in today’s numbers on new openings would provide deeper support for thinking positively. Recent history suggests we may see exactly that in the Labour Department’s March report for openings. Although the number of new positions open eased in February, the trend looks encouraging over the longer term.
Optimism will be on the defensive, however, if today’s release shows another decline. Note that it’s been nearly a year since we’ve seen back-to-back retreats in monthly job openings.
Reviving the negative bias across a two-month span via today’s release will weigh on sentiment after last week’s disappointing numbers on employment growth in April.
Disclosure: Originally published at Saxo Bank TradingFloor.com