Thursday’s a slow day for Eurozone data and so the report on new industrial orders for Spain will draw close attention as the crowd looks for additional clarity on the wobbly state of macro in Europe. Meanwhile, the US economy will be under the microscope with an update on housing starts, which will inspire a renewed assessment of the mixed numbers on the real estate market of late. Jobs are in focus too via the weekly report on new unemployment filings in the US.
Spain: New Industrial Orders (08:00 GMT) New worries about Europe’s already shaky economy are on the march again. Earlier this week we saw this year’s first decline in economic expectations for Germany via the July update of the ZEW indicator of economic sentiment. Meanwhile, the latest weekly analysis (as of July 11) of second-quarter GDP growth for the Eurozone was revised down a bit to 0.22 percent, according to now-casting.com - the first decline (albeit a slight decline) in the group’s second quarter estimate in more than a month. Nouriel Roubini of Roubini Global Economics noted a few days ago that the “the European economy is barely now recovering from a recession” and so the smoldering crisis in Ukraine still holds the potential to “tip back the Eurozone into recession”.
The optimists counter that it’s premature to assume the worst, although the truth will out soon enough as the hard data rolls in. Today’s key number to watch for deciding if the big picture macro trend is slipping over to the dark side again comes by way of an update on new industrial orders for Spain. Europe’s fourth-largest economy has been a crucial source of growth lately and so a setback here would be a disturbing sign. For now, the numbers have been encouraging. For example, Spain’s industrial output has been expanding on a year-over-year basis (seasonally adjusted data) for seven straight months to May and Markit’s business survey numbers for the country’s manufacturing sector suggest that the expansion will continue. Indeed, the Spanish manufacturing purchasing managers index (PMI) increased to a seven-year high last month.
Today’s update on new industrial orders will provide a revised set of hard numbers for looking ahead. The monthly figures are noisy, although there’s a good case for thinking that the annual pace will remain comfortably in the black. If not, macro risk for Europe will look quite a bit darker.
US: Housing Starts (12:30 GMT) The housing market has been sluggish lately, although yesterday’s encouraging news on the mood in the home building industry suggests that better numbers are coming. After a rocky stretch, building confidence is on the rise once more. The National Association of Home Builders Housing Market Index (HMI) increased to 53 for July - above the neutral 50 mark for the first time since January.
The improvement suggests that demand for houses will pick up, in no small part due to stronger increases in payrolls lately. “An improving job market goes hand-in-hand with a rise in builder confidence,” NAHB’s chairman said in yesterday’s press release. “As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home.”
Today’s update on housing starts will offer a hard data test of that theory. Analysts, however, don’t expect much more than a mild improvement in the June numbers against the previous month. The consensus forecast sees starts inching higher to 1.026 million from 1.001 million in May. But perhaps the real improvement will come in the July data, or so the latest HMI report implies. As such, a mild rise in today’s release will be taken as prelude to a bigger payoff a month from now - possibly.
Although builder confidence is on the rise again, the US Mortgage Bankers Association this week reported a five month low in the purchase application slice of its mortgage figures in seasonally adjusted terms. Suffice to say, the outlook for housing is still mixed. Today’s update on starts is not expected to bring much clarity other than to show that a steady calm endures for new construction. 
US: Initial Jobless Claims (12:30 GMT) There’s a lively debate about the relevance of the moderately higher increases in non-farm payrolls in recent months. On the plus side, there’s been a clear increase in the monthly change, with the net gain running above the 200,000 mark for five straight months through June (based on numbers that include private and government jobs). That’s the first run of 200,000-plus increases for five consecutive months in nearly 15 years.
Is the latest run of strength a genuine sign that the economy’s finally poised to create new jobs at a materially higher pace on a sustained basis? Or is it just another temporary bout of short-term noise that will again give way to the modest increases of recent history?
A new clue on sorting out what it all means arrives in today’s weekly number on new filings for unemployment benefits. The bulls on the labour market front have the wind at their backs for now, according to this leading indicator.
Last week’s report showed that claims fell to 304,000 for the week to July 5 - close to a seven-year low. But the data was for the July 4 holiday week and so the latest numbers may be misleading. If so, today’s release will sober up the optimists in due course. Yet the consensus prediction of a slight rise to 310,000 is not horrible. In fact, if the prediction holds, it will provide fresh support for thinking that modest improvement in the labour market is still in force. Claiming that the economy’s minting jobs at a substantially higher rate, however, will remain open for debate if the consensus forecast holds.