- Analysts see UK retail spending growth decelerating in today’s July report
- The data may stir debate about what's in store for the UK’s macro trend in H2
- The Philly Fed manufacturing index in August should show a softer gain
- The rebound in US industrial production will likely continue in the July update
Another day, another round of hard data for the UK economy, this time with the monthly data on retail sales. Later, the US is in focus with the August numbers due for the Philadelphia Fed’s manufacturing index, followed by the Federal Reserve’s monthly review of industrial production for July.
UK: Retail Sales (0830 GMT): Yesterday’s update on Britain’s labour market suggests that the economy, despite headwinds brewing due to Brexit, remains resilient.
Notably, the jobless rate ticked down to 4.4%, the lowest in more than four decades. Meantime, the claimant count, which was expected to rise, dipped in July, marking the first decline in five months.
Another plus: wage growth edged higher, which follows Monday’s news that UK inflation ticked lower. Despite the narrower gap, regular pay excluding bonuses continues to lag inflation. In turn, the sluggish gain for real wages stokes concern about the outlook for the consumer spending. Nonetheless, some analysts say the tide may be turning in favour of workers.
“The latest labour market figures provided some signs that the tightening in the labour market may be leading to a recovery in wage growth at long last,” an economist at Capital Economics said after yesterday’s release.
Given that backdrop, all eyes will focus on today’s monthly report on retail sales. The crowd’s looking for another monthly gain – Econoday.com’s consensus forecast calls for a 0.3% rise for July, although that's half the gain in the previous month. The annual pace is also on track to decelerate to a sluggish 1.4% advance, down from 2.9% in June.
If the weaker growth projections are accurate, today’s numbers will stir debate anew about what’s in store for the UK’s macro trend in the second half of the year.
US: Philadelphia Fed Manufacturing Index (1230 GMT): The bulls cheered this week’s preliminary look at US manufacturing activity in August via the New York Fed’s regional review of the sector. Will today’s data from the Philly Fed offer another round of encouragement?
If Tuesday’s release from the New York is a guide, the outlook remains bright. The bank reported that its survey informed benchmark for manufacturers surged from 9.8 to 25.2 in August, the highest reading in nearly three years.
A milder report is expected in today’s August report via the Philly Fed, although the data remains on track to reflect a healthy pace of growth. Econoday.com’s consensus forecast sees the index dipping to 17 from July’s 19.5, but that’s continues to align with a solid expansion for the manufacturing sector.
If the forecast holds, the news will strengthen confidence that output for the US overall will continue to skew positive in the August report for the ISM Manufacturing Index that's due in two weeks.
US: Industrial Production (1315 GMT): Industrial activity has bounced back this year and today’s hard-data update is expected to show that the rebound remains on track for the July profile.
Economists are looking for a 0.3% monthly advance, according to Econoday.com’s consensus forecast. Another gain would mark the sixth straight increase.
The upbeat monthly forecast translates into an acceleration in the year-over-year trend to 2.3%. If the implied estimate is on the mark, the annual trend for industrial output will pick up to the strongest rate in more than two years.
The manufacturing component in today’s release is expected to deliver upbeat figures, too. Output is on track to rebound with a 0.2% increase for July, reversing the previous month’s slump. Manufacturing activity has been uneven this year, according to Fed data, although the year-over-year growth has remained stable lately, albeit at a sluggish pace of just above 1%.
If today’s outlook for the monthly comparison is correct, the trend is set to firm up a bit, inching up to a 1.3% increase over the year-earlier level. That's still a weak gain, but it's also close to the best gain in two years, suggesting that the rest of the year may show some improvement.
Disclosure: Originally published at Saxo Bank TradingFloor.com