· UK employment data due – but furlough scheme likely to flatter the figures

· Attention likely to be back on US Federal Reserve for stimulus measures if consumer demand stalls

Macroeconomic highlights for the week start with data from the US in form of the JOLT Job Openings for June. This details the number of posts currently being recruited for and will offer a measure of the economic recovery. For context, this print had been consistently over 7 million for most of 2019 before falling sharply off the back of the COVID shut down. Further month-on-month contraction here could therefore be seen as a signal that the recovery is struggling to gain traction, with a number below 5 million having the potential to be cause for concern.

Tuesday sees the latest UK employment data, including Claimant Count for July and the Unemployment Rate for June. The former is expected to grow modestly, although won’t be taking account of the unwinding of the government furlough scheme. Expectations are for around 70,000 new claimants to be added. Similarly the unemployment rate is unlikely to reflect the full impact of events yet, but with forecasts suggesting a reading of 4.2%, that would be the highest reading in over two years and it’s picture which is unlikely to improve quickly.

The German ZEW Economic Sentiment Index for August is also slated for release. The forward looking nature of this report delivers some meaningful insight, although concerns that a sharp reversion could be seen need to be put into context. Having hit a 14 year high in June of 63.4, a retreat down to the high 20’s would still be well above the readings seen for most of the last five years. It’s a decline below this that would arguably offer real cause for concern.

The UK’s Q2 GDP figure will be published on Wednesday morning, confirming that the country’s economy has posted a second successive quarter of contraction and is therefore in recession. A record-beating -23% decline for the year-on-year figure is being talked about, although last week’s comparatively upbeat narrative from the Bank of England around recovery should probably take the sting out of this news. Headline writers will be poised, but market volatility will hopefully be short lived.

US Inflation for July is also set to be released today, which should show continued growth. Expectations are that the underlying rate will be around 0.7%, news which will offer the Federal Reserve some reassurance that its stimulus measures have worked so far. Anything much below that however will fuel concerns that further hand-outs to the wider population may be necessary.

Thursday looks relatively quiet, but Friday will see attention back on the other side of the Atlantic. US Retail Sales data for July is tipped to show some modest month-on-month expansion of around 2%. Any growth here however will be significant as the declines seen in March and April will have been entirely replaced by the bounce back over the last two months. More concerning however would be if momentum stalls here, again turning the attention back to the Fed and its next hand-out.

That certainly seems to suggest there’s an upbeat message amongst consumers, but the proof here could come in the shape of the Michigan Consumer Sentiment reading. Having risen through the latter part of 2019, the reading collapsed off the back of the COVID pandemic and has struggled to find any traction since. Expectations suggest a print in the low 70’s – anything below April’s eight year low of 71.8 would hint that a consumer led economic recovery may be a while off yet.

Article by Tony Cross of Monk Communications. This article first appeared in Octo Members, the app-based private community for UK financial services professionals.

Any opinions, news, research, analyses, prices or other information (“information”) contained on this Blog, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument.

Sugarcane Capital has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry. Sugarcane Capital will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information

No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, Sugarcane Capital does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk.