- Will Eurozone retail sentiment show more contraction?
- US job cuts data will be widely read after weak ADP estimate on payrolls
- Economists expect US jobless claims will stick close to 40-plus-year low
Markit’s monthly sentiment update on Europe’s retail industry for April offers fresh context for interpreting yesterday’s news of a surprisingly hefty decline for the hard data on consumer spending in March. Later, two US updates will be closely read in the wake of ADP’s estimate of soft job growth in April. First up is Challenger, Gray’s data on job cuts for April, followed by the weekly release on initial jobless claims.
Eurozone: Retail Purchasing Managers’ Index (0810 GMT): Retail sales in March fell more than expected, according to yesterday’s hard-data update from Eurostat. Spending slumped 0.5%, the biggest monthly slide in nearly two years. Today’s update on sentiment in the retailing industry will provide new context for deciding if the reluctance to open wallets will roll on in the second quarter.
This week’s data reflect a downside bias, which contrasts with last week’s surprisingly strong first-quarter GDP report for the Eurozone. Although output jumped 0.6% (quarter over quarter) in the first three months of 2016, the European Commission on Tuesday trimmed its outlook for growth slightly. The downgrade was followed by yesterday’s weak data on retail sales for March.
Today’s sentiment data for April offers an early clue on the outlook for the second quarter. The March reading of Markit’s Retail PMI already issued a warning, with a dip below the neutral 50 mark. Germany bucked the trend, Markit noted, posting robust growth at the close of Q1. But the hard data paints a darker picture for Europe’s main economy: retail spending slumped 1.1% in March compared with the previous month, based on Eurostat’s harmonised figures. Is that a prelude for continued contraction in the April PMI data? If it is, the rosy aura in last week’s first-quarter GDP report will continue to fade.
US: Job Cut Announcements (11:30 GMT) : ADP’s surprisingly weak estimate of growth in private payrolls for April raises new doubts about a second-quarter rebound in the US. Companies added just 156,000 new positions (seasonally adjusted) last month — the smallest rise in three years.
Sentiment was already on the defensive after last week’s news that first-quarter GDP growth tumbled — a meek 0.5% (seasonally adjusted annual rate), which marks a two-year low. Optimists counter that Q2 will bring stronger results, in large part because the upbeat labour market will keep the US economy firmly in expansionary territory.
Does ADP’s data for April suggest otherwise? Mark Zandi, chief economist at Moody’s Analytics, which co-produces the report with ADP, noted that “one month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.”
The watching begins with today’s monthly update on job cuts via Challenger, Gray & Christmas, an outplacement consultancy. If the labour market is truly deteriorating we may see the evidence in higher layoffs for April. Recent history suggests otherwise, according to this data set, which reveals two straight months of lower job cuts through March. Nonetheless, the year-over-year change has been positive for each month in Q1. Is that a sign that the labour market’s recovery is headed for trouble in Q2? A jump in job cuts for April will certainly fan the flames of worry.
US: Initial Jobless Claims (1230 GMT): New filings for unemployment benefits are still Exhibit A for thinking positively about the labour market and the US economy. Indeed, the weekly estimates for this leading indicator have remained at or close to multi-decade lows in recent months. By this standard, the sluggish gain for payrolls in April via ADP’s reckoning looks like a one-off event.
Today’s update for the last week of April isn’t expected to challenge the upbeat trend of late. Econoday.com’s consensus forecast sees claims rising slightly to a seasonally adjusted 262,000 for the week through April 30. But that’s just a stone’s throw from the 248,000 print for the mid-April total — the lowest since 1973.
Short of a dramatic surge higher, today’s update is on track to keep hope alive that tomorrow’s official payrolls report from Washington will deliver a decent round of growth. In fact, that’s what economists are projecting for Friday’s update.
Econoday.com’s consensus forecast calls for a solid rise of 200,000 for total nonfarm payrolls in April. But if that turns out to be wildly optimistic, on par with the disappointing ADP data, market sentiment will deteriorate further about the macro outlook for Q2 and beyond.
DISCLAIMER: Originally published at Saxo Bank TradingFloor.com