- German industrial output is expected to contract for September
- Analysts project that UK industrial output is steady but manufacturing will fall
- The pace of US job openings in September is on track to decelerate
New numbers on industrial production for Germany and the UK are among today’s highlights for economic news. Later, the US publishes new figures on job openings for September.
Germany: Industrial Production (0700 GMT) Factory orders unexpectedly fell in September, the Economy Ministry said yesterday.
The 0.6% slide surprised analysts, but the decline follows two monthly increases. Is the setback a significant clue?
Too early to say, although the crowd will be keenly focused on today’s data on industrial activity for a deeper read on the outlook for Germany’s manufacturing sector.
Keep in mind that survey data still paints a bright profile. Manufacturing activity accelerated in October, according to the IHS Markit. The German Manufacturing PMI jumped to a 33-month high last month.
But one economist has dialed down expectations after Monday’s weak report on new orders. ING-DiBa economist Carsten Brzesk noted,
It is hard to see how the German industry can shift to higher gear
Today’s hard data on output for September isn’t expected to make it any easier to argue otherwise.
Econoday.com’s consensus forecast sees production slipping 0.4%. But a mild setback isn’t a warning flag, at least not yet.
Indeed, output increased a strong 2.5% in September, which means that a degree of reversal is normal for the short term. Meanwhile, the unadjusted year-over-year gain through August was a sizzling 8.1%.
Meantime, firmer survey figures imply that the rest of the year still looks encouraging, the Economy Ministry advised:
The brightening of relevant sentiment indicators suggests a certain recovery of industrial production for the rest of the year.
Making that case via today’s release, however, could be tricky.
UK: Industrial Production (0930 GMT) Another snapshot of the post-Brexit UK economy is on tap today with the release of industrial production numbers for September.
A slightly clearer picture will emerge in terms of how the country’s faring since the public voted in June to leave the European Union.
Last month, the National Institute of Economic and Social Research (NIESR) estimated third-quarter GDP growth at 0.4%, down from 0.7% in Q2.
Tthe consultancy advised in October,
While retail sales have been buoyant in recent months, the production sector has acted as a drag on economic growth
NIESR will publish a new GDP estimate today at 1500 GMT. We’ll also see how much of a drag, if any, industrial activity continues to inflict on the macro trend with the release of the September report.
Analysts keep saying the Brexit fall must happen, but where is the proof?
TradingEconomics.com’s consensus forecast for the one-year change sees industrial output ticking up to an 0.8% increase, which is in line with recent history.
The year-on-year comparison for the manufacturing component, however, is expected to dip by 0.2% in September against the year-earlier level.
If accurate, manufacturing will post its first annual slide since March. In that case, the economy’s bears will have a new data point for arguing that Brexit blowback is starting to take a toll, if only on the margins.
US: Job Openings (1500 GMT) Job growth continues to print at a rate that’s strong enough to keep a lid on unemployment but soft enough to keep economists debating about what’s in store for 2017.
But the rest of this year still looks modestly encouraging, as implied in yesterday’s October update of the Conference Board’s (CB) Employment Trends Index (ETI), a broad measure of the labour market.
The index inched higher last month, “suggesting solid job growth will continue through early 2017,” CB’s chief economist for North America noted.
The moderation in the ETI’s pace of growth in recent months is typical, given the maturing of the labor market, and does not signal a significant slowdown in job growth.
Today’s update on job openings may challenge that analysis. TradingEconomics.com’s econometric estimate for September calls for a substantial decline to 5.24 million (seasonally adjusted), which would mark the lowest in nearly a year.
A lower pace of job openings wouldn’t be surprising. As the chart below reminds, employment growth via the official numbers published by the government have been trending down in recent history.
Meanwhile, job openings have been trending higher. The divergence was always destined to close. The only mystery: Which data set would blink first? Today’s update may provide the answer.
Disclosure: Originally published at Saxo Bank TradingFloor.com