· UK new car sales may indicate appetite of UK consumers for big ticket spending
· US employment and income stats to be published
It’s set to be a relatively quiet start to the week, but US Construction Spending data for June may hold some interest. COVID continues to hit the United States hard, but with the economy reopened, a strong reading is expected here. Month-on-month expansion of as much as 1% is being forecast after three successive months of contraction. The May figure was notably revised lower, falling well short of expectations. Another miss here will raise fresh questions over the outlook for the US economy and the dollar.
Staying on the other side of the Atlantic, Tuesday sees US Factory Orders for June being released. Having burst higher in May, expectations are for more growth to be seen here, although given the declines of -11% and -13.5% we saw posted in March and April, there’s a lot of catching up to be done. Again, any suggestion that momentum may be running out will heap pressure onto the Federal Reserve to deploy fresh stimulus measures in the near term.
UK New Car Sales for July are due to be published on Wednesday. Despite showrooms gradually reopening, the June figure posted a decline of almost 35% year-on-year, although the impact of aggressive discounting will be interesting to watch in this print. Another weak showing here will underline a lack of consumer confidence, something that has the potential to deteriorate further as the Autumn approaches.
Eurozone Retail Sales for June are also slated, with analysts hoping to see an improvement in both the month-on-month and annual metrics. The latter will be particularly telling as this will indicate that there is some pent-up consumer demand being fed into the market. Expectations are for a 1.2% increased. However it’s sustaining that momentum that will be most critical. If unemployment keeps creeping up, any appetite for spending will likely be curtailed.
Also on Wednesday, US ADP Payroll data will be released. This is a useful precursor to Friday’s non-farms report and another build is expected, although momentum does seem to be running out. With 3 million jobs added in May and almost 2.4 million in June, that’s gone some way to offsetting the 19.4m job losses reported in April. However a reading much below last month’s print would be seen as disappointing.
Thursday sees the Bank of England’s Monetary Policy Committee statement but there’s no expectation of any change to interest rates or bond buying. However, this note will be accompanied by the quarterly inflation report which will be closely followed. The recovery in oil prices seems to have come to a halt and assuming consumer demand remains lacklustre, the bank’s assessment of where inflation will go in the late summer will be closely followed.
UK Construction PMI for July is also due on Thursday. After contraction in April and May, the June figure jumped significantly above the break-even 50 mark. Expectations are for another strong print, although perhaps not quite as bullish as last month’s 55.3.
The Halifax House Price Index for July is published on Friday morning and has the potential to show the first impact of the Chancellor’s stamp duty holiday. However with month-on-month growth of just 0.3% expected whilst prices have essentially fallen by as much as 3%, that may fail to impress – and suggest that once the tax holiday ends next March, prices may end up falling back.
Rounding off the week are employment stats from the US. Non-farm payrolls typically get the majority of the attention, but the employment rate and average hourly earnings are also worth watching. Some 10.5% of the workforce is expected to be unemployed, down from almost 15% in April. Equally, month-on-month earnings are tipped to contract for the third consecutive month, with another 1% reduction expected. One challenge here is staff being rehired on lower wages exerts downward pressure on this metric.
Article by Tony Cross of Monk Communications. This article first appeared in Octo Members, the app-based private community for UK financial services professionals.
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