Key economic releases, July 20th 2020

20 Jul, 2020 | Market Insights | 0 comments

US housing market forecast to bounce back

· UK retail sales set to be positive, but down from May

· Eurozone flash PMI data expected to impress, UK readings looking less decisive.

The week starts with German Producer Price Index data for June. Expectations are that a reversal of the recent downward trend will be seen, with a year-on-year reading of -1.3% forecast following the May print of -2.2%. The prices paid by manufacturers filter through to those paid by consumers, so an extended run lower on this metric can ultimately manifest itself in deflation. Avoiding that is high in terms of priorities for the European Central Bank.

UK Public Sector Net Borrowing data for June will be released on Tuesday. Despite the pace at which the government has been spending money in an attempt to stabilise the economy combined with the fact many tax payments have been deferred, expectations are that this reading will show some month-on-month improvement. Failure to deliver this however could serve to rattle confidence in the Pound.

High profile data releases remain thin on the ground as the week progresses, although Wednesday’s US Existing Home Sales number has the potential to offer some optimism across the Atlantic. Having declined for three consecutive months and dropped to lows not seen for almost 10 years, expectations are again that a rebound should be seen here. A print of around 4.5 million is forecast, which would still be well below pre-lockdown levels but indicate a return to more normal market conditions despite the growing incidence of new COVID diagnoses.

Thursday sees the pace pick up a little, with the CBI’s Quarterly Business Optimism survey being released. This reports on a number of metrics and tells an interesting story in recent years. Summer 2016 saw the reading tumble off the back of Brexit uncertainty, whilst a six-year high was recorded in the wake of the decisive outcome of December’s general election. Q2 saw a record low of -87, the worst reading since records began more than 60 years ago so an improvement here is as good as inevitable. It is however the speed of that rebound that will be seen as most important.

Flash Eurozone Consumer Confidence data for July is also expected. A month-on-month improvement should be realised, and any concerns that the pace of recovery may now be slowing should be taken in context. It’s worth noting that the -22 recorded in April was no worse than prints at the depths of the Eurozone’s credit crisis and the rebound was far slower. Even a number around the -12.5 level may be worth applauding.

Rounding out the week, we have UK Retail Sales for June. It’s critical we see another month-on-month uptick here given this will cover the reopening of many non-essential stores. However gains are expected to be more measured than the figure observed in May. As driving picks up, it’s arguably best to look at the ex-fuel figures here and a month-on-month reading of around +5% would serve to reverse much of the damage done in April, although consumer uncertainty looking ahead is likely to make further guidance difficult to call.

Flash UK and Eurozone PMI data is also on the cards before the weekend break. There’s an expectation that the Euro area will manage to creep above the 50 mark on both the manufacturing and services metrics. The forecast isn’t quite as upbeat in the UK however, with a risk that sentiment could prove a little less buoyant. That said, a range of predictions are in play and should signs of growth be confirmed then Sterling could find some support as a result.

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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