An early clue of Britain’s economic trend for March is on deck today with the monthly update of the CBI Industrial Trends Survey. Later, the the monthly release of US existing home sales will focus attention on the weak housing market. In addition, the European Commission publishes its initial estimate for this month's Eurozone consumer sentiment data.
UK: CBI Industrial Trends Survey (11:00 GMT) Last week’s update on the labour market reminds us that the economic trend remains upbeat. The employment rate – the number of people working – is currently 73.3%, the highest level since the early 1970s. Meantime, wages ex-bonuses increased 1.7% for the three months through December vs. the year-earlier period, well above the annual 0.3% inflation rate. Meantime, the number of workers filing for jobless benefits continued to fall at a brisk pace, dipping to a seven-year low last month. Yes, there are risks lurking in the future for the UK, including the potential for blowback turbulence from Europe if Greece leaves the currency union. But today’s survey numbers that track the mood among UK manufacturing executives will likely provide more upbeat news.
Recent history certainly leaves room for optimism regarding Britain’s manufacturers. The Confederation of British Industry (CBI) reported last month that expectations improved in February to the highest level since last August. A similar benchmark published by Markit Economics tells a similar tale. “The UK manufacturing sector is reviving in early 2015 after the slowdown seen late last year, as growth rates of both production and new orders continued to strengthen in February,” a Markit economist recently noted.
The February CBI index rose to 10% last month, which is well above the 6% that analysts were expecting, based on the consensus forecast via Reuters. The 10% figure is calculated by taking the total of companies reporting order books at above-normal levels (26%) and subtracting the percentage of companies reporting orders below normal (16%).
A key factor for the brighter mood: a substantial decline in input prices in recent months. “The drop in oil prices is good news for the manufacturing sector in the UK, bringing with them lower operating costs,” CBI’s economics director said last month. If today’s update for March delivers similarly encouraging results, the case will strengthen for expecting that the UK’s first-quarter economic profile will remain on track for continued improvement. 
US: Existing Home Sales (14:00 GMT) The housing market has been weak lately, including sales of existing homes, which represent the majority of transactions in the US. In the January report, sales fell sharply, sliding to the lowest level in nine months – 4.82 million in seasonally adjusted annual terms. The recent slide is a bit odd because mortgage rates have been falling. But the latest decline in financing has had minimal effect in boosting demand.
Will today’s numbers tell us otherwise? Yes, according to Zillow, a housing research firm. Today’s February release will show a 1.3% rise to 4.88 million, according to Zillow’s current forecast. “Home sales are much less sensitive to interest rates than mortgage refinances, but rising rates will modestly increase the costs associated with buying a home,” Zillow advised. “It is widely expected that the boost to home sales from improving job markets will outweigh any headwinds from rising mortgage interest rates.”
By that standard, today’s update on sales for February should benefit from the ongoing strength in the labour market. Nonfarm payrolls increased 295,000 last month, a solid improvement over January’s rise of 239,000. That alone doesn’t insure an increase in home sales, but it certainly provides a tailwind. Maybe that's why economists generally are expecting a modest rise in today's data. MarketWatch.com's consensus forecast sees existing sales rising 2.5% in February to 4.94 million units in annual terms. If the prediction holds, it will mark the strongest monthly increase in percentage terms in nine months.
EU: Consumer Confidence (15:00 GMT) Europe’s macro trend is still reviving, according to Friday’s update of Now-casting.com’s GDP data. First-quarter output is expected to rise 0.4% over the previous quarter, the consultancy advised. If the estimate holds, the expansion in the first three months of this year will deliver the strongest gain since 2011.
There’s still a long way to go for estimating Q1 data. A full profile based on all the data won’t be available for months, and so it’s reasonable to assume that the real-time data will evolve for some time. But for the moment, cautious optimism prevails, albeit subject to revision. Today’s clue is the initial estimate of the European Commission’s measure of consumer confidence for March.
Recent history suggests that this measure of the mood will hold on to its recent gains if not inch higher. The stakes are moderately high for this release given that sentiment has been rebounding for the last three releases. A setback of any magnitude would cast a dark shadow over the prospects for ongoing improvement in the Eurozone's macro trend.
One reason for caution: the soft data in business sentiment, based on the EC’s Business Climate Indicator, which has been flat to slightly lower lately. That’s in contrast with the upbeat numbers in the consumer sector. Is the divergence a sign that the nascent recovery is vulnerable? Yes, but the business sector’s outlook will probably improve if the rebound in consumer sentiment endures. All the more reason to study today’s flash data for March for a hint of how the March trend is shaping up.