- Moderately upbeat news is expected in on UK labour markets for September
- Annual growth in Eurozone industrial output probably edged lower in August
- A mixed set of numbers is likely in today’s US retail sales release
Several hard data updates are scheduled today on both sides of the Atlantic, including the monthly Labour Market Report for the UK. We’ll also see the August data on industrial output for the Eurozone, followed by the September retail sales report for the US.
UK: Labour Market Report (0830 GMT): Consumer inflation turned slightly negative in September, but the return of deflation isn’t an obvious threat to economic growth at the moment.
Third quarter GDP growth for the UK probably slowed to a 0.5% pace, according to this week’s estimate from the National Institute of Economic and Social Research (NIESR). That’s down from Q2’s 0.7% gain, although a 0.5% advance is strong enough to keep the recovery going.
“This slight softening in the third quarter is expected to be temporary,” NIESR said in a statement. “Economic growth remains reasonable and, although we do not expect the Bank of England’s Monetary Policy Committee to vote to raise rates at its October meeting, we continue to expect the first rise in the Bank Rate in the first half of 2016.”
Today’s monthly update on labour market conditions in the UK for September will provide a reality check on NIESR’s generally positive outlook. Based on the crowd’s projection, the news du jour will provide a fresh set of numbers for maintaining a moderately upbeat outlook for the near term.
For example, Econoday.com’s consensus forecast calls for a solid decline of 12,000 in the claimant count for September while the jobless rate holds steady at a modest 5.5%. If the prediction for claimants holds, the slide will represent a healthy reversal after the slight increase in the ranks of the newly unemployed in August.
In fact, a 12,000 decrease in claimants would mark the biggest monthly drop since last March. In that case, NIESR’s upbeat estimate will ring true for evaluating the current state of Britain’s macro trend.
Eurozone: Industrial Production (0900 GMT): Economic growth in the currency union is facing stronger headwinds these days. Between the slowdown in emerging markets – China in particular – and the expected blowback from the emissions scandal at Volkswagen (OTC:VLKAY), the macro trend in the fourth quarter may end with a whimper.
Yesterday’s news of tumbling sentiment among German financial analysts and investors from the ZEW thinktank in Mannheim delivered an early warning. The update revealed that the Economic Sentiment Index slumped to just 1.9 points this month, against a reading of 12.1 in September, which was well below the consensus forecast. “The exhaust gas scandal of Volkswagen and the weak growth of emerging markets has dampened economic outlook for Germany,” ZEW advised.
Even so, ZEW doesn’t currently anticipate that Germany is headed for a recession. “The performance of the domestic economy is still good and the Euro area economy continues to recover,” noted ZEW President Professor Clemens Fuest.
Perhaps, but the recovery, which was never that strong to begin with, is moving into rougher waters. Third and fourth quarter GDP growth for the Eurozone is inching closer to 0.3%, according to last week’s estimates from Now-casting.com – slightly below Q2’s 0.4% advance. That’s not a big downshfit, but it’s another sign that expecting growth to accelerate is still on hold until further notice.
Today’s update on Eurozone industrial activity will likely reinforce the view that sluggish growth may become weaker still. Econoday.com’s consensus forecast calls for a 1.8% year-on-year advance in output in August. That’s only fractionally below the 1.9% annual increase in July. Nonetheless, today’s data will probably reaffirm the reality that the euro area’s modest recovery is downshifting – again.
US: Retail Sales (1230 GMT): If the consensus view is right, today’s September report on retail sales will be a mixed bag at best. Briefing.com’s survey of economists projects a 0.2% monthly increase for spending, unchanged from the previous month. That’s a sluggish rate, but it translates into a slightly stronger year-on-year gain of 2.5% against 2.2% in the previous update.
If the crowd is wrong and sales growth is weaker or negative in September, the news will weigh heavily on market sentiment at a time when concerns about growth generally are harassing macro predictions just about everywhere.
One reason for keeping expectations in check: the National Retail Federation last week said that it expects US holiday sales will decelerate to a 3.7% gain this year – slightly below last year’s 4.1% advance. Some analysts see even slower growth ahead. Frank Badillo at MacroSavvy forecasts holiday sales of only 3.5% this year – well below last year’s 4.5% rise.
AlixPartners recently warned that even slower growth may be coming – as weak as a 2.8% increase in holiday spending.
Some economists think the case for pessimism is excessive. Market volatility has cast a dark cloud over the near-term outlook, but the wobbly hard data for retail sales is only a temporary soft patch. Maybe, but disappointing data in today’s report will rev up concerns that the slowdown is ongoing.
Disclosure: Originally published at Saxo Bank TradingFloor.com