- The Composite PMI estimate for Eurozone Q2 GDP should point to stronger growth
- But no change is likely for March retail spending in the single currency area
- However annual retail spending in the Eurozone is on track to tick higher
- The US jobless claims update should support an upbeat jobs report for April
Thursday’s a busy day for new economic releases, including a revision of the Eurozone Composite PMI, which will highlight a new Q2 GDP estimate. The hard data on Eurozone retail sales for March is another highlight for macro reports today. Later, we’ll see the weekly release of jobless claims for the US, which offers more context for anticipating tomorrow’s official update on payrolls for April.
Eurozone: Composite PMI (0800 GMT) GDP growth remained stable at a moderate 0.5% pace in the first quarter, Eurostat reported in yesterday’s preliminary estimate. With the first round of official Q1 data published, the crowd will increasingly focus on the prospects for Q2, starting with today’s revised Composite PMI report.
Back to work ... the US jobs trend looks healthy in the latest ADP report, and today's initial jobless claims should also point to an upbeat trend at work. Photo: Shutterstock
In the flash numbers in the April 21 release, the outlook was encouraging, courtesy of a 0.7% estimate for Q2 growth. “Such strong growth, if sustained, will inevitably lead to upward revisions to economists’ 2017 forecasts,” noted the chief business economist at IHS Markit.
It’s too early in the quarter to make definitive conclusions, but other sources are also anticipating a pick-up in Q2 growth. Now-casting.com’s April 28 estimate, for instance, sees output rising to 0.82% for the April-through-June period.
But that’s too high for economists, according to a new survey from FocusEconomics. The firm’s May report finds that growth is expected to tick down to just 0.4% for Q2, based on the mean projection. That’s hardly a disaster, but it’s a reminder that there’s still a degree of scepticism in some circles for expecting that Eurozone economic growth will continue to accelerate.
“There remains the possibility that growth could be hampered by consumers being more reluctant to spend as their purchasing power is squeezed by overall higher inflation and limited wage growth in most countries,” said Howard Archer, chief European economist at IHS Markit.
Perhaps, but if today’s revised Q2 GDP estimate via PMI data continues to print at 0.7% – an improvement over Q1’s 0.5% – optimists will have a fresh reason for thinking that the Eurozone's macro trend is still on track to accelerate this year.
Eurozone: Retail Sales (0900 GMT) Today’s update on consumer spending in March offers another perspective for deciding if economic growth will ramp up in the months ahead. Recent numbers on this front, however, are mixed.
On the plus side, the hard data improved in the last update. Spending accelerated in February for a second month, rising 0.7% over the previous month – the strongest monthly gain in over a year. The year-over-year comparison also improved, nudging up to 1.8%, although this is still below recent highs.
Survey data, on the other hand, suggest that the appetite for buying remains challenged. The Retail PMI remained below the neutral 50 mark for a second month in March, tempering expectations for today’s hard-data update.
Perhaps, then, it’s no surprise to learn that economists expect that retail spending will remain unchanged in March in today’s release, based on Econoday.com’s consensus forecast. The year-over-year trend, on the other hand, is on track to accelerate to a 2.1% advance, the highest since November.
If the annual pace matches expectations, analysts may conclude that a soft monthly comparison is noise.
US: Initial Jobless Claims (1230 GMT) Companies added fewer workers last month, but the trend still looks healthy, according to the April release of the ADP Employment Report.
Private payrolls increased 177,000 last month, a substantially softer gain than in March. But the year-over-year trend perked up, suggesting that the near-term outlook for employment remains upbeat.
“Despite a dip in job creation, the growth is more than strong enough to accommodate the growing population as the labour market nears full employment,” said the vice president and co-head of the ADP Research Institute.
The low level of new filings for unemployment benefits doesn’t disagree. This leading indicator has routinely been printing near the lowest level since the 1970s in recent months and today’s update is expected to deliver a repeat performance. Econoday.com’s consensus forecast sees new claims falling by 11,000 to a seasonally adjusted 246,000 for the week through April 29 – close to February’s 44-year low of 227,000.
The upbeat claims data and the latest ADP release suggest that tomorrow’s official update on payrolls from the Labor Department will tell a similar story, namely: employment growth is still likely to deliver moderate growth for the foreseeable future.
Disclosure: Originally published at Saxo Bank TradingFloor.com