· UK salary data likely to show COVID taking toll on bonus payments
· UK GDP forecast to fall further, but reading could mark the bottom of the curve.
The week starts on a relatively quiet note in terms of data, but a speech which is due from the New York Federal Reserve President John Williams could provide some helpful insight. Mr Williams recently noted that the country’s economy is far from healthy, adding that the path of the COVID virus will dictate what happens next. Given the fact a number of states continue to struggle with getting infection rates down, this address could well end up weighing on sentiment.
German Inflation data for June is due to published on Tuesday morning, with expectations being that this will send a positive message out over the state of the Eurozone’s largest economy. Having hit 0.6% for May, the annualised figure is tipped to push towards the 1% mark. That’s still well below the ECB’s target of just below 2% but a move like this should offer some reassurance that deflationary threats may be averted.
The UK GDP three-month average May report will also drop on Tuesday, with a further deterioration expected. A print of -17.5%, down from the -10.4% seen a month ago is forecast, but that should hopefully mark the bottom of the curve. With non-essential stores having reopened in mid-June, subsequent readings ought to look a little less ugly – it’s probably important not to be too distracted by this number in isolation.
Eurozone ZEW sentiment is a useful leading indicator, with the July reading due to be printed on Tuesday, too. This figure has been gaining pace quickly as survey participants were confident that the economy would be past the worst by the summer, although consensus estimates do suggest a modest reversion will be seen following the 14-year high posted in June.
Wednesday sees the UK Retail Price Index for June being released. The month-on-month reading dipped into negative territory in May but that is expected to be a short-lived move. Annualised core inflation – that’s the metric which excludes food and fuel – is worth noting too, given the sharp fall in oil prices over the last year. This number is likewise expected to show a modest uptick from the 1.2% posted in May.
The latest update on the UK employment situation will be released on Thursday. There’s a slew of numbers each covering a different period, but the headline unemployment rate for June is tipped to come in at 4.2%, up from 4% in May. This number has the potential to jump significantly higher in the coming months as the government furlough scheme is wound down. Average earnings including bonuses for May will also be released and are expected to plunge into negative territory. A contraction of -0.5% is forecast, which would make for the worst reading since the tail end of the 2008/09 financial crisis. Again, further declines for this reading into the summer would be no surprise.
US Retail Sales for June will be printed on Thursday, with the year-on-year figure still expected to remain negative, although a forecast of -3% is significantly better than the record low of -19.9% posted for April. Markets may however take some solace from the speed of the rebound here, so long as there’s a belief the momentum of the recovery can be maintained.
Rounding off the week, the flash Gfk Consumer Confidence figures for July will be released. Expectations are that sentiment here will remain deeply depressed and whilst some month-on-month improvement is forecast with a print of -26, there’s no suggestion a rapid rebound will be seen here. Some confidence may be derived from the fact sentiment isn’t expected to collapse to the extent seen in the financial crisis where a low of -39 was recorded.
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