• US data including new home sales and Chicago PMI could show signs of economic weakness
  • Quiet week for European data releases but UK car production and French consumer confidence in focus.

It’s another relatively quiet week for economic data, with the Chicago Fed National Activity Index for July kicking off proceedings. Last week, the Federal Reserve cautioned over the pace of the US economic recovery, so numbers like this can expect to be closely followed as markets look for more evidence here. Having posted a record high reading of 4.11 in June, expectations are for a reading of around 2 being seen. That’s still high in historical terms, but with the reading having plunged to -18 in April, those with a more hawkish outlook may be disappointed by the relatively quick contraction here.

Sticking with the US, Tuesday sees New Home Sales for July published. The May and June figures showed a degree of catching up after the market stalled earlier in the year, but expectations are that the peak may have already passed. Making any judgement off this one figure in isolation would be difficult but expectations are for around 750,000 new sales, down from 776,000 last month. Anything closer to 700,000 could be a cause for concern.

Moving a little closer to home, French Consumer Confidence data for August will be released on Wednesday. The country – like many across the world – continues to wrestle with COVID-19 but there’s some optimism that this figure will see a modest improvement on July’s print of 94. Failure to deliver this and anything approaching May’s reading of 91 has the potential to raise fresh concern over the prospects of an economic recovery in the Eurozone

Also on Wednesday, US Durable Goods Order data for July is due. Critically the market will be looking for a positive reading here and whilst this will be well below the upticks seen in May and June, so long as the month on month number comes in above zero, markets are likely to be relatively relaxed. As has already been noted, the Fed is wary over the economic outlook from here – this number remains one to watch.

Thursday sees UK Car Production for July being published. The industry practically ground to a halt during the depths of the pandemic’s first wave, but notes from motor dealers in recent days have suggested that demand is accelerating already. Aggressive discounting has been promoted too, but expectations are that this will be the best reading seen since February albeit still around 16% lower than the reading for July 2019.

The week rounds off with more US data, starting with US Personal Spending for July. Expectations are that this will continue to expand month-on-month, comprehensively outstripping the corresponding US Personal Income print. Whilst that supports the idea of a consumer-led recovery and would be welcome in the short term, it’s clearly not a sustainable position in an already debt-laden economy.

Chicago PMI data for August is also expected ahead of the weekend break and could offer something of a reality check. The July print saw a sharp jump higher as the region’s economy reopened, jumping to 51.9 – a number which was well ahead of expectations. The momentum isn’t however expected to last, with forecasts around 47 being made. Data is inevitably going to be volatile as businesses attempt to restart, but any signs of contraction emerging already could end up weighing on broader sentiments.

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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