- Eurozone Retail PMI for June should show that spending will continue to grow
- If retail sales rose again last month, that will be the sixth straight month of rises
- ADP’s estimate of US jobs growth for June should slow after May's strong rise
- The US ISM Non-Manufacturing Index should show moderate growth in June
Eurozone retail sales are in the spotlight again today with the release of the sector’s PMI for June. Later, two US numbers for June will draw close scrutiny: the ADP Employment Report and the ISM Non-Manufacturing Index.
Eurozone: Retail PMI (0810 GMT): Retail spending in the euro area rose more than expected in May. Will today’s survey data for June tell us that the positive momentum will roll on?
The hard numbers certainly look encouraging. Retail sales in May jumped 0.4% -- a fifth straight rise. The gain lifted the year-over-year rate to 2.6%, the fastest pace since last November.
“May's increase in Eurozone retail sales suggests that household spending growth picked up in Q2,” Capital Economics advised in a research note. “And the final Eurozone Composite PMI for June implies that the wider economy also had a strong second quarter.”
The bullish run for the consumer sector is expected to extend through June, according to the outlook for today’s Retail PMI via TradingEconomics.com's econometric forecast. If the estimate is right, the PMI will hold above the neutral 50 mark for a third month. Although the index is projected to tick lower, slipping to 51.5 from 52.0 in May, the forecast continues to imply that the Eurozone’s recovery will keep moving forward at the year’s halfway mark.
US: ADP Employment Report (1215 GMT): The monthly change for payrolls in the private sector accelerated sharply in May, but a tamer increase is expected in today’s update of the ADP Employment Report for June.
Econoday.com’s consensus forecast sees payrolls rising a moderate 180,000. That’s a healthy rate, but it’s down from May’s 253,000 surge. The implied one-year change for payrolls in today’s release is also expected to decelerate slightly to 2.0%, down from 2.1% previously.
Keep in mind, however, that a 2% annual pace, give or take, suggests that the labour market remains on track to expand for the foreseeable future, even if the monthly comparison suggests otherwise.
In previous months, the ADP data’s annual trend slipped, downshifting to around just 1.8% at one point. There was concern at the time that the labour market was facing new headwinds. But the year-over-year trend has rebounded in 2017.
As long as the pace is 2%, give or take, the evidence will continue to favour an optimistic outlook for payrolls. By that standard, no sign of trouble is expected in today’s report. If so, the news will boost confidence that tomorrow’s official data for June payrolls will bring encouraging news as well.
US: ISM Non-Manufacturing Index (1400 GMT): Echoing a divergence in competing sets of survey data for manufacturing, a pair of benchmarks for services is also telling two different stories.
Using the ISM Non-Manufacturing Index as a guide, the services sector continues to expand at a solid rate. The benchmark’s 56.9 reading for May – well above the neutral 50 mark – implies, too, that the US economy remains on solid footing. Today’s update for June is expected to show a mildly softer number: Econoday.com’s consensus forecast calls for a fractional dip to 56.5. But that’s still a robust level and it translates to a forecast of moderate growth for the second half of the year.
There's one glitch, however: the trend looks considerably softer via Services PMI. Although the index remained above 50, the flash 53.0 reading for June (scheduled for an update today at 1345 GMT) marked the lowest level since March. That’s still a healthy print, but the recent slippage doesn’t align with the much-stronger figures in the ISM reports.
“The economy ended the second quarter on a softer note,” said the chief business economist at IHS Markit recently. “The June PMI surveys showed some pay-back after a strong May, indicating the second-weakest expansion of business activity since last September.”
It’ll be interesting to learn if today’s ISM release continues to differ with that analysis by delivering a positive spin on the sector's profile.
Disclosure: Originally published at Saxo Bank TradingFloor.com