- Economists expect the UK claimant count to head higher
- Robust consumer spending is supporting the UK economy, for now
- A mild rebound is projected for US industrial production in October
- US home builder confidence is on track to hold steady at strong rate
The UK labour market is in focus today, offering the crowd another update on how the country’s economy is faring in the wake of the Brexit vote in June. Later, two US numbers will be widely read for insight into how the macro trend may unfold as a new president gears up to move into the White House. First up is the October update on industrial production, followed by fresh data on sentiment in the home building industry for November.
UK: Unemployment Report (0930 GMT): The number of new claimants for unemployment is expected to tick higher for the third month in a row in today’s October report from the government. If the forecast is right, the news may feed worries that economic fallout from Brexit threatens to spill over into the labour market in the months ahead.
TradingEconomics.com advises that the consensus forecast calls for a modest increase of 2,000 in the claimant count for last month. That’s a trivial rise, but if the projection is accurate it’ll mark the third straight monthly increase.
There are already hints that economic growth is slowing. The latest GDP estimate from the National Institute of Economic and Social Research (NIESR), for example, points to a 0.4% increase for the three months through October. That’s still a respectable pace but it reflects the second downshift from the recent peak of a 0.7% rise in August.
“Robust consumer spending growth continues to support the economy,” a researcher at NIESR said last week. “Looking ahead, this contribution from consumers is expected to wane over the course of next year due to a substantial rise in the rate of inflation", which is widely viewed as a byproduct of Brexit via a sharp devaluation in the pound.
Today’s update on the claimant count doesn't appear set to deliver dark news per se, but it may offer more ammunition on the margins for those who think that the recent UK referendum to leave the European Union will come with an economic price tag in time.
US: Industrial Production (1415 GMT): The industrial sector is still contracting, but there are signs that a healing process is underway.
Notably, manufacturing output has firmed up in recent months. As the biggest component of industrial production, the modest revival in the manufacturing sector suggests that the trend will strengthen in the months ahead.
That’s the message in the ISM Manufacturing Index, a survey-based indicator that inched up to its highest reading in three months in October. An even stronger round of encouraging numbers is unfolding in the Markit US Manufacturing PMI, which jumped to its highest reading in a year last month.
“Factories benefitted from rising domestic and export sales, driving output higher to mark an encouragingly strong start to the fourth quarter,” said the chief business economist at IHS Markit earlier this month.
Today’s hard data on industrial production for October may offer a glimmer of support, particularly for the manufacturing component. Analysts are expecting another round of modest growth in the month-over-month data. The annual pace for the headline industrial index, however, is still on track to skew negative, but at a lesser rate.
The good news: manufacturing output is set to rise slightly in October vs. the year-earlier level, which would mark the first annual gain since June. If the forecast holds up, the news may convince the crowd that there’s finally light at the end of the tunnel for the long-suffering industrial sector.
US: Housing Market Index (1500 GMT): The pace of residential housing construction in September fell to its lowest level in 18 months. But if the slowdown in the number of housing starts is a warning sign, home builders are inclined to shrug off the weakness as a temporary setback.
The October reading of the Housing Market Index (HMI), a survey-based index that tracks sentiment among home builders, dipped to 63 last month. But that still reflects an optimistic outlook. “Even with this month’s drop, builder confidence stands at its second-highest level in 2016, a sign that the housing recovery continues to make solid progress,” the chairman of the National Association of Home Builders observed last month.
Today’s HMI report for November is expected to hold steady at 63 for the third month, according to Econoday.com’s consensus forecast. In other words, builders appear set to send a message that construction activity will perk up in tomorrow’s release of hard data on housing construction for October.
Disclosure: Originally published at Saxo Bank TradingFloor.com