· UK unemployment in focus but number still insulated by government support
· US PPI reading could highlight potential inflationary pressures
· UEU Summit seen as deadline for Brexit trade talks convenes on Thursday
The latest UK Unemployment and Average Earnings data for August will be in focus on Tuesday morning. With the government working hard to support employees, there’s the ongoing risk that these numbers fail to reflect the longer-term picture of the labour market in a post-COVID world, but regardless, expectations are fairly downbeat. Salaries are expected to be down by as much as 1%, whilst the headline unemployment rate is likely to tick up to around 4.2%.
The forward looking ZEW Economic Sentiment Index for October will also be published on Tuesday and the picture across the Eurozone is looking increasingly bleak. The reading plunged into negative territory in March before making a steady recovery. Confidence however is vanishing fast as swathes of the continent are pushed back into lockdown and the currency bloc-wide figure is tipped to slip from last month’s 16 year high of 73.9 down to something around the 60 mark.
Wednesday morning sees the release of Eurozone Industrial Production data for August. The month-on-month metric is arguably the one to watch here as it could show a decline back into negative territory. The figure jumped higher in May, offsetting some of the lost demand from earlier in the year, but has been declining steadily since. A reading below zero would raise fresh questions over the ECB’s ability to find further appropriate stimulus measures.
US Producer Price Index data for September is also due on Wednesday. This number is important as pressure amongst producer prices tends to feed through to underlying inflation. The year-on-year reading has printed negative for the last five months but a jump positive here would offer some hope that the country’s economy can be righted.
Away from economics, but Thursday sees the two day EU summit convene and this had been widely touted as representing the last throw of the dice as the UK hunts out a post-Brexit trade deal. Suggestions from Brussels were that talks may need to continue to the month end, but the dialogue here could well impact both the Pound and London-listed equities.
Friday sees US Retail Sales data for September being issued. Again as with the PPI reading earlier in the week, this will be an important guide when it comes to US inflation expectations. Modest month-on-month growth would be sufficient to keep the annualised reading above 2%. There’s an ongoing debate in the US as to whether a second stimulus payment should be made to the wider population. Indications that retail sales are booming would arguably do little to further the cause here.
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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