UK Services, EU Retail Sales, US ISM Non-Mfg

The January read on the UK Services PMI will deliver fresh clues for analysing the next phase for Britain's struggling economy, followed by an update on retail sales for the Eurozone, and the January ISM Non-Manufacturing report for the US.

UK Services PMI (09:30 GMT) Estimating the odds for macro trouble in the UK will be a bit clearer after today's release of the Markit/CIPS Purchasing Managers Index (PMI). In the December review, this benchmark of the services sector in Britain slipped under the neutral 50 mark for the first time in two years. Analysts reacted to the news a month ago by warning that another recession was plausible if not inevitable. But the worst fears are still debatable after last week's release of the Manufacturing PMI for January, which remained above the neutral 50 mark for the second month in a row.

Granted, manufacturing's revival, if that is the term, remains marginal, at best, at this point. Nonetheless, Markit economist Rob Dobson opined (pdf) that “a second consecutive month of improving business conditions in the manufacturing sector is an encouraging start to 2013." Perhaps, but seeing the glass as half full will wear a bit thin if the services sector's December slump deepens in January. The market is expecting a bit of a rebound, but one that falls short of the neutral 50 mark. In that case, there will be enough for both bulls and bears to chew on in today's data.


EU Retail Sales (10:00 GMT) Has the worst of the Eurozone's economic slump passed? It is tempting to think positively lately, thanks in part to encouraging reports from various sentiment surveys in January. But corroborating evidence from the real economy has been thin so. Today's update on retail sales does not look poised to change this mismatch. Economists are projecting that consumer spending for the core Eurozone economies (EU-17) will decline slightly in last year's final month versus November.

Right about now an upside surprise would come in handy. In the previous release, real retail sales for EU-17 managed to eke out a 0.1 percent increase in November - the first monthly gain since July. A small bit of light, which was followed by several upbeat sentiment surveys from the business and consumer sectors. A setback in retail sales today would not automatically negate the surveys - the hard numbers for retail lag sentiment data by roughly a month. Unfortunately, last week's January update of the Markit Eurozone Purchasing Managers Index (PMI) did not bring much cheer for the new year's numbers. As the press release (pdf) noted, Eurozone retail sales retreated as 2013 began, based on the PMI.

Keep in mind too that preliminary December retail sales for Germany and France have already been published and both of EU-17's two largest economies lost ground, according to Eurostat. That means that a gain for the Eurozone overall in today's retail sales review really would be a surprise.

US ISM Non-Manufacturing Index (15:00 GMT) Last week's healthy rise in the ISM Manufacturing Index for January suggests that the industrial side of the economy is playing catch-up to the ongoing expansion in the services sector. Today's update on the ISM Non-Manufacturing Index will test that theory, although economists are confident that another upbeat report is in the cards. The consensus forecast anticipates a January reading at roughly 55. That is down modestly from 56.1 in December, but a small decline will not matter much if, as expected, a comfortable margin over the neutral 50 line is maintained.

The larger message is that if today's services index holds at 55 or higher, the combined January readings for the two ISM benchmarks will offer the strongest pairing in nearly a year. That is a potent signal for thinking that moderate growth for the US economy will roll on for the near term. But the fine print, as usual these days, can be found within the debating chambers of Congress. True, the potential fallout from the uncertainty tied to debates over the government's debt ceiling and automatic spending cuts has been temporarily delayed... again. Yet looking at the economy's forward momentum via the private sector suggests that the current expansion still has legs, assuming that politicians in Washington do not cut them off.