- The UK jobless rate is on track to tick down as the claimant count rises
- Analysts project a faster growth rate for Eurozone industrial production in May
- PMI survey data for Eurozone manufacturing looks bullish as well
- US inflation expectations will likely remain subdued in today’s Atlanta Fed data
The UK economy returns to the spotlight today with the monthly report on the labour market. We’ll also see an update on Eurozone industrial activity, followed by the Atlanta Fed’s survey data on inflation expectations among businesses in the bank’s district.
UK: Labour Market Report (0830 GMT): Economic output in Britain is expected to slow over the next two years, according to a new forecast by S&P Global Ratings. “Growth is set to remain on a moderate trajectory as imported inflation squeezes household budgets and uncertainty about the outcome of the EU exit negotiations dampens investment,” the consultancy advised on Tuesday. Will today’s update on the labour market for June support the prediction?
No, or at least not in the sense that today’s release will dispense a smoking gun. The consensus forecast calls for an already low jobless rate to tick down to 4.5% from 4.6% in May, according to Econoday.com. Britain’s claimant count, however, is projected to reflect a more worrisome trend.
The number of workers applying for jobless benefits is on track to increase in June, rising for a fourth month. If the prediction is correct, the advance will mark the longest continuous run of increases since last year’s August-November period. Meantime, economists are looking for the claimant count to reach a two-year high of 810,000.
The broad growth trend has been downshifting this year, according to GDP data published by the National Institute of Economic Research (NIESR). The group’s current estimate for quarterly growth is 0.3% for June. That’s slightly stronger than the 0.2% advance in the official Q1 report from the government. Nonetheless, the 0.5%-0.7% trend that prevailed in last years’ second through fourth quarters is nowhere on the horizon.
Eurozone: Industrial Production (0900 GMT): Boosted by yesterday’s stronger-than-expected results for Italy’s industrial sector in May, today’s Eurozone release is on track to accelerate too.
Econoday.com’s consensus forecast sees output rising a strong 1.2% for the monthly comparison – a forecast that translates to the best gain since last November.
The year-over-year trend looks headed for a firmer growth rate too. The implied forecast (based on the monthly prediction) points to a 2.2% increase for May vs. the year-earlier level – a solid improvement over April’s 1.4% rise.
Survey data paints a bullish profile too. The Eurozone Manufacturing PMI rose to a 74-month high in June, reflecting the strongest trend for the sector in more than six years. “At current levels, the PMI is indicative of factory output growing at an annual rate of some 5%, which in turn indicates the goods-producing sector will have made a strong positive contribution to second-quarter economic growth,” the chief business economist at IHS Markit said last week.
In the wake of upbeat numbers generally for the Eurozone in recent months, it’s likely that today’s hard data on industrial activity for May will provide more support for expecting the rebound to continue.
US: Atlanta Fed Business Inflation Expectations (1400 GMT): Minutes from last month’s US Federal Reserve policy meeting reflect renewed confidence that inflation will return to the central bank’s 2% target by 2019. Embracing this outlook gives the Fed an excuse to continue raising interest rates. In the near term, however, pricing pressure appears set to remain relatively weak, which is to say below target, raising questions about the wisdom of tightening monetary policy.
The implied Treasury market forecast, for instance, anticipates inflation at roughly 1.7%, based on the yield spread for the nominal 10-year note less its inflation-indexed counterpart. That’s down from the market’s 2.0% forecast in March.
Consumer prices offer a similar narrative: below-target inflation that’s modestly weaker at the moment compared with earlier in the year. The headline measure of the Consumer Price Index, for instance, increased 1.9% in May vs. the year-earlier level, down from 2.8% in February.
Today’s survey data for inflation expectations in July will probably offer more data that points to flat-to-weaker pricing pressure. The year-ahead inflation estimate among businesses in the Atlanta Fed’s district was unchanged at 2.0% last month, based on the median forecast. Considering the mild downside bias in inflation data generally in recent months, it would be surprising if today’s July survey reveals a firmer outlook for pricing pressure.
Disclosure: Originally published at Saxo Bank TradingFloor.com