⌛ Did you miss ProPicks’ 13% gains in May? Subscribe now & catch June’s top AI-picked stocks early.Unlock Stocks

3 Numbers: Upbeat German Industrial Activity, EZ Sentiment, U.S. Labour

Published 06/08/2015, 01:30 AM
Updated 07/09/2023, 06:31 AM
NTRS
-

The key event for European economic news today is Germany’s monthly update on industrial production, which follows last week’s better-than-expected monthly gain in factory orders. Later, Sentix publishes a new estimate of investor sentiment for Europe, followed by the Federal Reserve’s monthly release of its Labor Market Conditions Index for the US.

Germany: Industrial Production (06:00 GMT): April was a strong month for factory orders, the Economics Ministry reported last week. The surprisingly strong 1.4% gain vs. the previous month suggests that today’s number for industrial production will follow suit. The Ministry suggested as much in a statement on Friday, advising that “German industry looks bound to experience a boost.”

Maybe, but business sentiment in the manufacturing sector suggests that today’s numbers may not impress the crowd on par with factory orders. Markit’s purchasing managers' index for manufacturers dipped to a three-month low in May, which follows April’s mild decline. The PMI is still signalling a modest degree of growth, but companies noted a further slowing of new order growth last month, Markit reported.

The hard numbers on factory orders for April paint a brighter profile, which raises the question of which data set’s misleading us about the trend? Economists are voting on the side of optimism. Today’s monthly release on industrial activity is on track to post a solid rebound in April vs. March’s retreat, according to Econoday.com’s consensus forecast. The crowd’s looking for a 0.6% monthly advance in output and a modest 0.8% rise for the year-over-year change.

Thinking positively aligns with the latest outlook from the Bundesbank, which raised its economic forecast. The central bank expects Germany’s GDP will grow 1.7% this year, modestly higher than the previous 1.4% estimate. “These are the first signs that the improvement in business sentiment in the Eurozone translated into higher demand and arrived in Germany,” a Frankfurt-based economist at UniCredit told Bloomberg on Friday.

The question is whether today's numbers for industrial production agree?

Germany: Industrial Production and M-PMI

Eurozone: Sentix Investor Sentiment (08:30 GMT): Speaking of sentiment, today’s numbers from Sentix offer a fresh look at the mood in the investment community. One clue for thinking that we’ll see a slightly softer number is the recent weakness in the German stock market, which continues to trend lower after its mid-April peak.

The Eurozone recovery is still intact, but the drama that accompanied the initial revival in recent months has faded a bit. Now-casting.com’s current estimate for second-quarter GDP still projects a 0.5% quarter-over-quarter rise, which represents a slight improvement over Q1’s 0.4% advance. But Grexit risk is still lurking.

Meanwhile, the initial phase of euphoria that greeted the early days of renewed optimism that Europe was recovering has passed. The focus now turns to the hard work of building on the limited progress to date.

The ongoing uncertainty bound up with Greece continues to weigh on the Eurozone. Last week the Greek government announced a delay on the repayment of an IMF loan and the deputy prime minister raised the possibility of new elections. It’s just another chapter in the ongoing soap opera, but it’s enough to keep the crowd guessing. In any case, it’s not helping boost confidence that Europe’s fragile recovery is about to accelerate.

Given this backdrop, a degree of backsliding in Sentix’s sentiment index shouldn’t come as a surprise. The currency bloc’s recovery will likely prevail, but for now it’s still shaping up to be a sluggish rebound with no shortage of bumps along the way.Eurozone: Investor Confidence vs Composite PMI

US: Labor Market Conditions Index (14:00 GMT) Payrolls rose more than expected in Friday’s surprisingly strong payrolls report for May. The crowd was looking for a gain of 220,000 and instead the government advised that jobs increased by a much-stronger 280,000 last month.

The news was interpreted by the Treasury market that the Federal Reserve would likely begin raising interest rates, perhaps as early as September. In the wake of the bullish report, the benchmark 10-year Treasury yield topped 2.40% on Friday for the first time since last October.

The upbeat numbers on jobs for May “certainly brings a September rate increase into much clearer focus”, observed Carl Tannenbaum, chief economist at Northern Trust (NASDAQ:NTRS) in Chicago.

Today’s monthly release of the Fed’s Labor Market Conditions Index will be a relatively sleepy affair by comparison, but this broad measure of 19 indicators is on track to deepen the case for anticipating a stronger run of economic growth.

Econoday.com's consensus forecast calls for a rise to 2.3, the first positive reading since February. That's not particularly surprising at this point, but the news will provide more evidence that the US economy may be stronger than previously assumed.

US: Labor Market Conditions Index

Disclosure: Originally published at Saxo Bank TradingFloor.com

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.