• ECB may give clues over further stimulus measures before year-end
  • Spanish Consumer Confidence to highlight risk of COVID-19 second wave
  • UK GDP for July could show recovery well underway

The week gets off to a relatively quiet start with US markets closed for the ‘Labor Day’ holiday. There will however be some data of note released across the Eurozone with German Industrial Production numbers for July first up. May and June both recorded significant month-on-month rebounds following the initial COVID-driven slump, but expectations are that the pace of growth will now start to slow. Forecasts suggest expansion of a further 3.5% or so, well down from the 8.9% increase posted a month earlier.

Spanish Consumer Confidence may also give some broader insight when the August figure is published on Monday. Consensus here has this number slipping to levels not seen since the Eurozone credit crisis, with the country’s struggle to tackle COVID-19 and the accompanying hit on the tourist economy both dragging. Expectations are that this number could be in the high 40s, potentially serving as an early indicator of how a second wave of infections could hit other countries in the coming months.

Keeping with the Eurozone, Tuesday sees the release of German Balance of Trade data for July. This is a contentious point across the single market as Germany frequently outperforms at the expense of its peers and the forecast EUR22billion surplus would be the biggest number on record for 18 months. It will also have the potential to reinvigorate the debate as to whether Berlin is doing enough to support the trading bloc in the wake of COVID-19

US Consumer Credit Change data for July is also due on Tuesday, with another build expected here. Modest gains are very much seen as the standard here, as would be expected with a consumer (and credit) driven economy. Job losses and broader uncertainty saw this figure dive into negative territory for March, April and May before expanding to +$8.5 billion in June. This theme of growth needs to be sustained if markets are to be convinced that US consumers aren’t now wavering in light of an outlook which remains uncertain.

Keeping with the US, Wednesday sees the publication of US JOLT Job Openings for July. Having posted steady gains through the second quarter, expectations are that growth will now stall and around 5.8 million posts will be available, a reading which is essentially unchanged from the June figure and could heap further pressure on the Federal Reserve to do more in order to stimulate the economy.

Thursday’s ECB Monetary Policy Meeting will be in focus, following the news that August’s inflation figure slumped into negative territory. That’s the first time this has been seen in four years and the threat of deflation is now seen as very real. Although no major policy shifts are expected at the meeting, any clues in the press conference as to what might happen next will be closely followed. Additional stimulus measures before the year end would be of little surprise, with the benefit for exporters of seeing the Euro weaken as a result.

Rounding out the week, Friday’s release of UK Balance of Trade data for July is expected to show another surplus, although at £1.2 billion, that’s going to be significantly lower than the numbers seen through the second quarter. Those previous figures were however skewed by lower imports, so with the UK economy reopening the rebalancing is to be expected. This figure will however be closely followed as we approach the end of the Brexit transition period, as further stockpiling is likely.

The UK July GDP reading will also be published, with another month-on-month improvement expected. Critically this number will help define the shape of the UK’s economic recovery. June’s three month average came in at -20.4%, forecasts put the July figure at around -8%. Anything better than this would provide some welcome cheer going into the weekend break that the much needed economic momentum continues to build.

Article by Tony Cross of Monk Communications. This article first appeared in Octo
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