UK Retail, US jobless claims, Phil. Fed index

Thursday is a moderately busy day for economic news, mostly for the US, including the Conference Board’s index of leading indicators, scheduled for release at 14:00 GMT. Analysts think we’ll see a modest increase for the March reading on this widely followed benchmark of the US business cycle. In addition, keep an eye on the day’s other key numbers: UK retail sales, US jobless claims and the new estimate for the Philadelphia Fed Index.

UK Retail Sales (08:30 GMT): Yesterday’s employment report was a mixed bag. A bigger-than-expected drop in the claimant count was encouraging, but it was marred by a slight rise in the number of unemployed persons. In short, both bulls and bears found something to chew on in yesterday’s numbers in the delicate art of deciding if the macro pressure is rising, or not, on the Bank of England (BoE) to juice monetary stimulus with another rate cut. That sets us up for today’s update on retail sales for March.

If the data du jour is likely to tip the scales one way or another, analysts expect the pendulum will swing toward more stimulus. The consensus forecast sees retail sales suffering a reversal of fortune for March by dropping 0.8 percent, a sharp retreat after February’s 2.1 percent surge. More troubling is the expectation that the year-over-year comparison will dip back into the red again with a 0.4 percent fall. In that case, the trend would continue to look rather negative. The BoE is still reluctant to inject more liquidity into the economy, as yesterday's release of the monetary policy committee minutes reminded us. The inflation hawks still outnumber those who favor more quantitative easing. But a poor report on consumption data today will make it that much harder to maintain a hawkish stance when the central bank releases its next monetary policy statement on May 9.


US Jobless Claims (12:30 GMT): Last week’s update on weekly filings for unemployment benefits pulled this leading index back from the brink of darkness. Previous reports reflected a disturbing rise in new claims, the most since last November, when a hurricane temporarily drove the jobless population sharply higher. But that was about weather. This time, it's the economy proper. Given the wobbly numbers in the March payrolls report, along with last month’s weak retail sales update, any sustained rise in jobless claims raises at this point would raise concerns about the business cycle. As such, today’s release will be closely watched for signs that last week’s good news was more than a one-time event.

Expectations are muted, although the consensus forecast anticipates that claims will at least hold on to the previous update’s sizable drop. A big negative surprise, however, would look troubling at this stage. That's unlikely, but you can never be quite sure with this volatile series for any given release. On a brighter note, Tuesday’s upbeat numbers on housing starts and industrial production for March suggest that any sluggish data may not be fatal after all. Nonetheless, putting a positive spin on the big picture is going to be an uphill battle if jobless claims don’t behave.

US Philadelphia Fed Index (14:00 GMT): This regional survey of the business outlook will bring another clue on what to expect for the widely followed ISM Manufacturing Index, which will be updated on May 3. The good news is that the market is expecting another round of modest improvement in today’s release. The broad measure of this index—general business conditions—is predicted to rise to 3.3, up a bit from last month’s 2.2, which was the first increase over the neutral zero mark since January.

Is the manufacturing sector poised to remain in a growth mode generally, for the US overall? The hefty drop in the ISM index isn't encouraging, although it did manage to stay above 50, which means that manufacturing output is still expanding. But Monday’s update on manufacturing activity in the New York region suggests that we should manage expectations down. Indeed, the Empire State Manufacturing Index slipped by a bigger-than-expected degree in the April estimate. A negative surprise in today’s Philly Fed update would be another sign for thinking that the ISM index will continue to trend lower in April as well.