S&P: Macro Monday - Spear's Magazine

S&P: Macro Monday

The US housing market is centre stage in the coming week with several updates due. The UK agenda is also busy, with updates on inflation, unemployment and retail sales to digest

The US housing market is centre stage in the coming week with several updates due. The UK agenda is also busy, with updates on inflation, unemployment and retail sales to digest. The eurozone has a quieter week in store, but final April inflation figures will be closely watched, along with the German ZEW index. Central banks are never far from the spotlight, with minutes from the latest Bank of England and Federal Reserve meetings due to be published on Wednesday.

Looking across the pond, the May survey from the National Association of Homebuilders is first up on Monday, and is forecast to show a one point rise to 17.0. April housing starts and permits figures follow on Tuesday, with permits seen edging up to 590k from 585k month on month and starts rising to 570k from 549k. 4cast comments that the trend in home construction remains soft amid weak demand for new homes, as price-sensitive buyers are much more active in the existing home market. Existing home sales for April are due on Thursday with consensus predicting an increase to 5.2m from 5.1m. 4cast notes that the large number of sales of distressed properties and lacklustre demand will keep prices contained.

Among the week’s remaining US data, the Empire State index for May will be released on Monday. This is expected to show a dip to 20.0 from 21.7 month on month. The May Philly Fed index is due on Thursday with consensus anticipating a rise to 23.0 from 18.5. Sandwiched in between those two regional surveys we have April industrial production data on Tuesday. This is forecast to show expansion of +0.4% month on month, slowing from +0.8% in March, with capacity utilisation of 77.6%. Wednesday evening brings the release of FOMC minutes, which 4cast thinks will indicate that exit strategies from current accommodative policies are still in the discussion phase, with opinions varying as the timing and sequence.

Over in the UK we have a flurry of data to examine, starting with April CPI numbers on Tuesday. After March’s downward move to +4.0%, inflation is expected to be back on the rise, with consensus looking for +4.2% year on year. However, UK investors are inured by now to the above-target numbers and the recent quarterly inflation report has already served to clarify the Bank of England’s thinking, with the market now expecting a rate rise in 3Q this year, or 4Q at the latest. Minutes from the last BoE rate-setting meeting will be published on Wednesday, with HSBC expecting an unchanged voting pattern.

Wednesday also brings the latest unemployment data for the UK. Consensus expects the ILO unemployment rate for March to show a rise to 7.9% from 7.8%. Meanwhile, the April claimant count is seen rising by 1,500, giving and unemployment rate of 4.5%. Average earnings for the three months to march are seen up +2.2% year on year, excluding bonus payments. HSBC highlights recent evidence that private sector hiring is easing off, as shown by weaker readings of the employment components in PMI surveys. Despite the uncertain jobs picture, it seems the unexpectedly warm weather in April will have been the main driver of retail sales, with data due for release on Thursday. Consensus sees sales up +0.7% month on month, much faster than March’s +0.2% increase, with food and clothing likely to lead the way.

In the eurozone, final April EU-harmonised inflation numbers are due on Monday. These are expected to be unchanged from the flash reading of +2.8% year on year, compared to +2.7% in March, though it should be noted that final April data for Germany saw an upward revision. The German ZEW survey for May is set to be released on Tuesday. The current conditions measure is seen moving up to 88.0 from 87.1, though the expectations component is forecast to slip to 5.0 from 7.6.

Emma Stevenson – S&P MarketScope, ems@sandp.com



 

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