- A jump in retail sales will be good news for UK
- Mixed results are expected for US housing starts
- Slight drop likely for US jobless claims
Thursday is a moderately busy day for macro news, including a retail sales report for Britain — the last round of hard numbers ahead of today’s historic vote on Scotland's future. Later, a couple of US releases will provide fresh perspective on the economic trend via reports on new residential construction and last week’s data on new jobless claims.
UK: Retail Sales (08:30 GMT) For the second month running, consumer spending fell in Scotland on a year-over-year basis in August, according to yesterday’s update from the Scottish Retail Consortium. It’s unclear if the weakness is related to today’s vote on whether Scotland should become independent. In any case, today’s hard data on retail sales for Britain will be closely watched as a snapshot of consumer demand on the eve of what could be the start of a risky period for the British economy. This much is clear: if the independence movement prevails today, macro conditions on both sides of the border will change dramatically.
As for retail sales in Britain, there’s a good chance that today’s update will provide a bit of optimism for expecting that consumer spending will continue to rise for the near term. Although the growth trend has softened in recent months, based on the annual rate, a recent survey of retailers point to stronger numbers for September. “Retail sales grew strongly in the year to August with the pace of growth expected to accelerate again in the month ahead,” the Confederation of British Industry (CBI) said late last month with the September update of the Distributive Trades Survey.
Not surprisingly, economists expect that today’s hard data on retail spending for August will accelerate. The consensus forecast from Econoday.com points to year-over-year growth in retail sales of 4.2% through to last month — a hefty improvement over the 2.6% annual increase for July. If the forecast holds, the acceleration will certainly be welcome as the UK stands on the precipice of what could be a lengthy phase of uncertainty if Scotland opts for independence.
US: Housing Starts (12:30 GMT) Optimism is on the rise among home builders. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) increased for the fourth straight month in the September update, reaching the highest point since November 2005. “Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” said NAHB chairman with yesterday’s release.
Improving sentiment is one thing. Today’s report on housing starts and newly issued building permits for August will offer a reality check on whether the revival in animal spirits in the building industry is translating into a rise in construction activity. The rear-view mirror, however, looks mildly encouraging. In the July release, when both starts and permits posted modest increases, rising close to the best levels in a year.
The steady advance in the HMI in recent months suggests that there’s a positive tailwind blowing in housing again. But economists remain cautious. The consensus forecast for August calls for mixed results in today’s report: a modest dip in the number of housing starts and a slight improvement in permits. Even so, the steady rise in HMI of late implies that the housing sector is on track for brighter days ahead,,, even if that’s not on display in today’s report.
US: Initial Jobless Claims (12:30 GMT) Recent numbers for the labour market reflect a bit of weakness after a summer of improvement. For the moment the latest stumble looks like noise, although today’s weekly update on new filings for unemployment benefits will provide some timely guidance.
Note that jobless claims have been inching up lately, rising to the highest level since late June for the week through to September 6. The increase follows a surprisingly weak report on August payrolls, which delivered the smallest rise in new jobs so far this year. Is that a sign that trouble’s brewing? Probably not, or at least that’s the message in this week’s update on job openings as reported by the US Labor Department.
Wobbly data
The number of job openings and new hires by US employers in July reached post-recession highs, the government reported on Tuesday. But the numbers don’t reflect the wobbly payrolls data for August. Perhaps today’s claims report will offer some clarity. The consensus forecast calls for a slight drop in new claims to a seasonally adjusted 305,000 for last week, according to Briefing.com. That’s down from 315,000 in the previous release.
That will be a move in the right direction, assuming the prediction holds. But even if the consensus estimate is right, it's not enough to alleviate heightened anxiety in the wake of the soft report on payrolls for August. That is, unless we see a sizable downside surprise in today's numbers.