- Is the UK labour market headed for slower growth?
- Brazil's retail sales continue to slide although the pain may ease on the margins
- Sentiment in US home-building industry expected to remain at a nine-year high
The UK’s economy is in focus again today with the monthly release of the labour market report. We’ll also see fresh numbers on retail spending for Brazil, which has been among the hardest-hit emerging market economies this year. Meanwhile, analysts expect an upbeat report for the US housing market via sentiment data for home builders.
UK: Labour Market Report (0830 GMT): Will politics derail the labour market? That’s a worry, according to recent reports that the arrival of national living wage rules next year will curtail hiring. Workforce consultancy Manpower reported that the outlook for hiring is the weakest in nearly three years, based on its new survey of UK companies. The majority of firms (88%) have no plans on hiring while 7% are expecting to boost staff levels and 3% are expecting to shave payrolls. The resulting net positive reading of 4% is the lowest since 2012's fourth quarter.
“The national living wage is sending shockwaves through the UK labour market,” a spokesman for Manpower said.
The heightened uncertainty raises the stakes for today’s monthly update on jobs. But if there’s trouble on the horizon, it’s not expected to show up in today’s numbers – at least not in decisive terms. Unemployment has ticked up lately, but Econoday.com’s consensus forecast sees the jobless rate as unchanged at 5.6% for the three months through July.
Meanwhile, the claimant count, which runs one month head of unemployment data, is on track for a modest decline of 4,900. That would be mildly encouraging, although the slide in the number of newly unemployed is a fraction of last year’s robust pace.
Given the concerns over the living wage rules, an unexpected rise in the number of claimants would heighten fears that the labour market’s expansion is winding down.
Brazil: Retail Sales (1200 GMT): Brazil is near the bleeding edge of major economies suffering from a recession these days. The current contraction is the worst in 25 years for this formerly high-flying emerging market. But if there was any doubt about the near-term macro prospects for one of the biggest economies in the developing world, this month’s downgrade of Brazil’s debt to junk status by Standard & Poor’s sends a strong signal.
Keeping an eye on Brazil’s contraction offers a degree of guidance on emerging markets generally. That’s a critical topic these days amid rising worries about the global economy, thanks in part to China's slowdown.
Brazil’s woes are closely linked with the bear market in commodities that’s been rippling around the world, with negative consequences given its comparatively hefty reliance on exports of raw materials. Considering its macro sufferings of late, it’s reasonable to see South America’s largest economy as a proxy for the outlook on emerging markets generally. When Brazil starts to show convincing signs of recovery, surely that will be an encouraging clue for the developing world.
But not today (or any time soon, for that matter). Retail spending in Brazil has been sliding for months in annual terms and the contraction isn’t about to give way. The pain may ease on the margins, however. If we see anything close to a flat year-over-year performance, the news may provide some hope that the worst may be over.
Yes, that’s still a long-shot notion, although a lesser shade of red ink in today’s retail number would at least be a mildly refreshing change from recent history of falling deeper into the hole.
US: Housing Market Index (1400 GMT): Today’s update on the mood in the home building industry will be useful for deciding if the encouraging signals for this indicator of late are holding up in September. The news will be an especially helpful bit of macro intelligence in the wake of yesterday’s disappointing numbers on industrial production and retail sales.
Output fell short of projections for the monthly comparison in August by posting a 0.4% loss. Retail sales were also softer than expected, although consumption in August still increased by a modest 0.2%. Nonetheless, there’s a growing sense that the broad trend is slowing. Deciding if the deceleration raises business-cycle risk in a meaningful degree is an open question at this point, which is why today’s housing market release deserves close attention.
A serious stumble for the housing sector would send a deeply worrisome signal. But that’s not going to happen with today’s report, or so the consensus view suggests. Econoday.com’s survey of economists sees no change in the Housing Market Index, which is expected to stick to 61 in September.
In that case, this benchmark will remain at a nine-year high, signalling that home-builder confidence is still solidly optimistic and well above the neutral 50.0 mark. If the forecast holds, the news will ease some of the concerns that the US economy is slipping over to the dark side.
Disclosure: Originally published at Saxo Bank TradingFloor.com