- A rebound in British retail sales is expected in today's update for April
- However CBI data implies that a downside surprise may be lurking in retail
- US jobless claims are on track to slide for the first time since mid-April
- The Philadelphia Fed manufacturing index should rebound into positive territory
A busy day of economic news awaits, including the monthly update on British retail spending. Later, two US numbers deserve close attention: the weekly update on US jobless claims and an early clue on manufacturing activity in May via the Philadelphia Fed’s monthly report on regional activity.
Rise in store ... retail sales data for April is expected to confirm upbeat expectations for UK consumer spending. Photo: iStock
UK: Retail Sales (0830 GMT): Britain’s labour market appears to be relatively stable, which is no mean feat given the rise in economic uncertainty as the country awaits the outcome of next month’s referendum on European Union membership. Although analysts are warning that there could be negative macro repercussions if the UK quits the EU, there wasn’t much sign of Brexit fallout in the labour market data for April. Indeed, the jobless rate held steady at a low 5.1% rate, while wage growth picked up and new filings for jobless benefits fell.
Will today’s April release for retail spending deliver upbeat news too? Yes, according to Econoday.com’s survey of economists. The consensus forecast is looking for a 0.6% rebound in month-over-month sales — a solid improvement after March’s 1.3% slide. The annual rate of growth is projected to tick lower to 2.5%, but that’s strong enough to argue that consumers remain willing and able to spend.
Sentiment in the retail industry, however, paints a darker picture. Indeed, British retail sales tumbled by the most in four years in April, according to the CBI distributive trades data. The survey’s sales balance dropped to a four-year low of negative 13 for last month — down from a positive seven value in March.
“Cold weather put a chill in sales of spring and summer ranges with a reported dip in retail sales in the year to April, but with the near-term outlook for household spending holding up the sector expects a modest rise in sales” in May, the CBI's director of economics said last month.
Maybe so, but the CBI’s figures imply that there's a downside surprise lurking in today’s hard-data update for April.
US: Initial Jobless Claims (1230 GMT): It may turn out to be noise, but the recent surge in new filings for unemployment benefits looks troubling.
Jobless claims soared by 20,000 to a seasonally adjusted 294,000 in the first week of May — the highest in a year. The surprisingly strong increase is the third weekly gain, pushing claims to just below the 300,000 mark. Is this an early sign that the US labour market is stumbling?
April payrolls posted their smallest gain in seven months, which implies that the bearish data in claims in recent weeks is another reason to manage expectations down for the economy in general and the labour market in particular.
But a closer look at the claims data suggests that there may be a joker in the deck. Analysts explained that a strike in New York state by workers at Verizon accounted for most of the gain. As such, the dark signal in claims is less about US economic weakness than a turn for the worse in worker relations at a certain telecom firm.
Perhaps that's why economists expect a reversal in today’s update. Econoday.com’s consensus forecast calls for a sharp drop in claims to 275,000 in the second week of May. If the crowd is wrong, however, and claims spike above 300,000 today, the macro cheering squad will have a tougher time blaming the worrisome news on Verizon.
Philadelphia Fed Manufacturing Index (1230 GMT): The preliminary look at US economic data for May continues with today’s release of manufacturing numbers for the Philly Fed’s region.
The crowd’s looking for some moderately upbeat news, which will be a welcome change after Monday’s disappointing data from the New York Fed. The Empire State manufacturing report was surprisingly weak, with the headline index sliding back into negative territory for May. The plunge, which leaves the New York Fed index at a three-month low, suggests that the manufacturing sector is still struggling to recover after a year of challenging business conditions.
A repeat performance in today’s Philly Fed data would deepen concern that the expected second-quarter rebound for the US economy is on shaky ground. But economists are projecting a firmer reading. Briefing.com’s consensus forecast sees the regional benchmark ticking back into positive territory in May after sliding just below zero in the previous month. But if the forecast is overly optimistic, as it was with the New York numbers earlier this week, the Q2 rebound narrative will suffer another setback.
Disclosure: Originally published at Saxo Bank TradingFloor.com