- UK Services PMI headed for another round of mild deceleration
- US jobless claims to tick lower and print near a multi-decade low
- Economists project ISM Non-Manufacturing Index will stay strong in October
Thursday is packed solid with economic news from far and wide, including the first look at the UK Services PMI numbers for last month. Later, attention turns to US data: initial jobless claims and the ISM Non-Manufacturing release for October.
UK: Services PMI (0930 GMT): Britain’s economic news has been surprisingly upbeat in the post-Brexit era… so far. Sterling has tumbled, but the expected blowback remains MIA at the moment. Is that because the dark forecasts are wrong? Or is there a delayed reaction?
A former Chancellor of the Exchequer is firmly in the latter camp. “At the moment because nothing has happened, other than, of course, the pound has plummeted, people have lulled themselves into a false sense of security,” Alistair Darling said in an interview with Sky News this week.
But the macro comeuppance is still coming, he warned. “The consequences of us leaving [the European Union] and the consequences of decisions being made by firms now will take some time to feed through.”
Perhaps, but a new economic forecast begs to differ… sort of. The Confederation of British Industry and the National Institute for Economic and Social Research (NIESR) project that UK GDP growth will be moderately higher next year — 1.3% and 1.4%, respectively — against the government’s official forecast of 1.0% for 2017.
But there’s a catch, according to NIESR, which also projects that UK inflation will soar to 4% next year due to the sharp currency devaluation since the June referendum in favour of leaving the EU.
Today’s monthly update of the UK Services PMI isn’t expected to reflect Brexit blowback, but it’s not exactly on track to be a poster child for optimism either. TradingEconomics.com’s consensus forecast calls for another mild decline for the PMI, which is predicted to ease to 52.4 for October.
That still leaves the index above the neutral 50 mark. But in the current climate, a new round of data that points to modest growth that’s slowly decelerating will keep the debate bubbling about what’s next for the UK economy in a post-Brexit world.
US: Initial Jobless Claims (1230 GMT): Private-sector job growth slowed to a five-month low in October, according to yesterday’s ADP Employment Report. But rather than signalling trouble ahead, the downshift suggests a softer but sustainable bias for hiring.
“Job growth remains strong although the pace of growth appears to be slowing,” said the chief economist of Moody’s Analytics, which co-produces the ADP data. “Behind the slowdown is businesses’ difficulty filling open positions.”
The fact that new filings for unemployment benefits continue to post low numbers supports the view that slower job growth isn’t a warning sign for the economy.
Initial jobless claims continue to print at levels that are close to a multi-decade low and economists think the encouraging trend will replay in today’s release.
Claims are projected to dip 3,000 to a seasonally adjusted 255,000 for October’s final week, according to Econoday.com's consensus forecast. The estimate puts the indicator close to the 246,000 print for the last week of September, which marked the lowest level since 1973.
In other words, this leading indicator for the labour market won't be sending dark signals any time soon. That’s no assurance that faster economic growth is near, but it’s a clue for thinking that the macro trend will continue to skew positive in some degree for the foreseeable future.
US: ISM Non-Manufacturing Index (1400 GMT): The macro trend has slowed lately, but the all-important services sector appears to be re-accelerating after stumbling in late summer.
Last week’s initial October estimate for the Services PMI popped up to an 11-month high. Given the sector’s influential role in the US macro trend overall, the news suggests that the third-quarter rebound in GDP growth will spill over into Q4.
“The latest survey data reveal a decisive shift in growth momentum across the US services sector, which mirrors the more robust manufacturing performance seen during October,”
IHS Markit’s chief economist said last week.
“Taken together, the ‘flash’ PMIs suggest that the economy is growing at an annualised rate of around 2% at the start of the fourth quarter."
(Note that the Services PMI is scheduled for an update today at 1345 GMT, just ahead of the ISM release.)
Today’s first look at the ISM Non-Manufacturing Index for October is projected to reaffirm an upbeat view.
Although Econoday.com’s consensus forecast sees today’s number easing to 56.1 from 57.1 in September, the prediction still represents a healthy rate of growth.
In short, the services sector is off to an encouraging start for Q4.
Disclosure: Originally published at Saxo Bank TradingFloor.com