- UK Consumer Credit expected to show borrowing on the rise again
- UK PMI print could see services growth at strongest level in five years
- US labour stats expected to be upbeat but unemployment likely still around 10%
With much of the UK observing a Bank Holiday on Monday and calendars relatively quiet elsewhere, it’s set to be a relatively quiet start to the week. However, Tuesday’s Caixin Manufacturing PMI reading from China for August will provide some interest overnight. This privately produced figure is expected to retreat a little from the July print of 52.8, but with China claiming that its post-COVID economic recovery continues to widen, a reading below 52.5 could be cause for concern, especially if export demand remains sluggish.
UK Consumer Credit for July will also be released on Tuesday, with expectations that the four month run of net contraction will now be at an end. This will fuel hopes that consumers have the confidence to help reignite the UK economy, but failure for the market to see a positive print here has the potential to raise fresh fears over the pace of recovery.
Also on Tuesday, Eurozone Inflation for August is published. This is a preliminary reading, but the risk here is that the number falls into negative territory. Following May’s year-on-year print of just 0.1%, there has been a gradual improvement in sentiment but if retailers are discounting heavily, such a reading would create fresh pressure at the ECB to accelerate stimulus measures, in turn weighing on the common currency.
German Retail Sales are out on Wednesday morning covering July. The year-on-year figure here only went negative for one month – April – before rebounding quickly. There’s an expectation that this print won’t quite match June’s 5.9% but it shouldn’t be much below that. Obviously however it’s important to bear in mind the impact of pent up sales following the lockdown and the fact that this metric doesn’t identify the impact of discounts.
The Nationwide House Price Index is also due, with a more measured month-on-month increase of around 0.4% expected, against the previous reading of 1.7%. Estate agents report properties are moving quickly and the stamp duty holiday should also be having a beneficial effect. Failure to see some growth however again risks raising concern over the sustainability of the economic recovery.
ADP Payrolls will also be published on Wednesday, giving the traditional early view of Friday’s non-farm payrolls. Job losses were incredibly severe back in April and July’s print, although positive, still looked lacking. Expectations are for around 150,000 more jobs to have been added, but that’s still a long way from the 20 million which were lost off the back of the COVID lockdown.
UK Services PMI will be out on Thursday. Expect this to be closely followed as the market looks for a recovery in this dominant sector. As the headlines tell us, failure to get people back into offices will be a drag on services, although expectations are that a reading above 60 could be seen here. That would make for the highest reading in five years, perhaps enough to offer some consolation that much of the necessary momentum is already being seen.
Friday sees the UK Construction PMI data print. This sector had a far shorter phase of contraction compared to services, but forecasts suggest that the July figure of 58.1 will mark the top of the cycle – at least for now. Critically a number above comfortably above 50 – so indicating expansion – is anticipated, but without a broader economic recovery this will be difficult to maintain.
Rounding off the week we have the US Non-farm Payrolls reading. Solid growth in the headline rate is anticipated but arguably of greater interest will be the unemployment rate and average hourly earnings. The headline figure for those out of work is set to be down a fraction, but still around the 10% mark, whilst incomes are tipped to hold broadly steady month-on-month.
Article by Tony Cross of Monk Communications. This article first appeared in Octo
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