Weekly Economic Data Preview
US Housing Market and Eurozone Survey Data Stand Out amid August Holiday Torpor
In the UK, after a predominantly subdued tone from the Bank of England's Inflation Report and MPC minutes, this week sees something of a pause for breath in terms of economic data releases. The main highlight will be the second estimate of Q2 GDP, where we look for an outturn of +1.1% quarter-on-quarter, unrevised from the preliminary estimate published in late July. Subsequently-released June industrial production figures - which showed a 1.0% quarter-on-quarter increase during Q2 - imply no revision to the preliminary GDP estimate (taken alone, at least). Other UK releases this week include the CBI's Distributive Trades Survey, where we look for a net balance of 30% of retailers reporting higher sales volumes compared with a year ago. As a quarterly survey, the report will also contain a balance on prices which be watched closely in the context of the UK inflation debate. Finally, Nationwide house price data for August are also released.
This week sees a variety of key economic data in the eurozone. In particular, the latest wave of PMI business survey data are published while later in the week Germany's Ifo report is released. In contrast to the general tone of US data, eurozone PMI surveys have performed very well recently on the back of robust Asian demand for exports and relief following the recent EU bank 'stress tests'. We look for a modest correction in August's preliminary manufacturing survey to a reading of 56.5, from 56.7 previously. Within services, meanwhile, our forecast stands at 55.5 compared with July's outturn of 55.8. Other key indicators this week include Germany's Ifo survey, where we see a pull-back in the expectations component reflecting concerns about the evolution of global economic recovery. We expect the overall business climate index to soften to 105.3 from July's 106.2. Finally, euro M3 money supply data will incorporate the latest figure on bank lending to the private sector. Significantly, the pace of contraction in loans extended to non-financial corporations has now started to ease.
This week in the US there are a number of important updates regarding the housing sector, GDP and durable goods orders. Following a record widening in the US trade deficit in June, we expect the second estimate of Q2 GDP on Friday to be revised down to 1.4% quarterly annualised growth from an originally reported 2.4%. Furthermore, Q3 GDP indicators to date are suggesting that growth could remain muted for some time. Although US durable goods orders are expected to have rebounded in July, we think by 0.5% month-on-month, recent surveys suggest underlying demand is softening. Furthermore, the sluggish recovery in the labour market is hindering any uplift in confidence and spending. While we expect initial jobless claims to fall by 25k after last week's shock rise to 500k - the worst since November 2009 - the number of lay-offs by firms has clearly trended up in recent months and will weigh on household spending over the coming quarters. The weak labour market is also likely to coincide with continued weakness in existing and new home sales. Following a firmer-thanexpected rise in June, we look for existing home sales to have fallen by 13.2% in July, to a level of 4.67 million.
Meanwhile, in emerging markets, the South African economy is expected to have expanded by 3.1% year-on-year in Q2, up from 1.6% during the previous quarter. Nonetheless, the recovery remains fragile, in particular domestic private demand continues to lag the export sector. Consequently, we expect interest rates to be maintained at 6.5% into 2011.
Full Report in PDF |
