3 Numbers: Cracks Emerge In German Jobs Trend, EZ CPI, U.S. Confidence
James Picerno | Jun 30, 2015 01:19AM ET
It’s still said the president of Germany’s Federal Employment Agency.
Today’s update for June isn’t expected to reveal much of a change from the previous round of upbeat news. Nonetheless, it’s possible to see some cracks in the generally positive trend. In particular, keep an eye on the monthly change in the number of unemployed persons. This key metric has been sending mostly bullish signals in recent history.
The jobless population has declined for eleven straight months through May. But as the chart below reminds, the slide is decelerating, with a relatively thin fall of only 5,000 in May (seasonally adjusted), the smallest drop since last August.
That’s hardly a tragedy, but it’s a reminder that Germany’s rebound after the global financial crisis and recession of 2008-09 is no spring chicken. Yes, it’s all part of the natural evolution of the business cycle and in some respects there’s nothing unusual or worrisome here. But given the extraordinary events in Greece at the moment, even a whiff of lesser growth for Europe’s biggest economy will resonate – particularly if today’s numbers are unusually weak.
Last week’s news that consumer confidence is in retreat is another reminder that the potential for trouble can’t be ignored. “The previously unsuccessful attempts to find a solution to the debt crisis in Greece as well as the country's impending default now appear to be dampening German consumers' economic outlook,” Gfk noted in the monthly update of its survey data.
It’s probably just a temporary setback, although today’s labour market release will provide fresh context for deciding if there’s more blowback to come.
Eurozone: Consumer Price Inflation (09:00 GMT): Recent data for the Eurozone paints an encouraging if still modest recovery trend. The upbeat figures include the rebound in inflation. The headline year-over-year comparison is especially stark of late in showing that the trend in prices has pulled back from a brief flirtation with deflation.
Does the escalating Greek crisis threaten the progress to date? Probably not, at least not beyond the immediate future. But any optimism that the currency bloc will survive with or without Greece is subject to daily if not hourly revisions these days. That includes today’s flash estimate of inflation for June.
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There’s a good case for anticipating that we’ll see some slowing in pricing pressure. Yesterday’s numbers for this month’s estimate of German inflation suggest as much: consumer prices were weaker than expected, easing to a 0.3% year-over-year rise – well below the 0.7% increase in May.
The surprisingly hefty degree of deceleration suggests that something similar may show up in today’s Eurozone data. "June's sharp fall in German HICP inflation confirmed that underlying price pressures have remained very subdued even in the Eurozone's strongest economy," noted an analyst at Capital Economics yesterday. "While weakness in Germany will be partly offset by the rise in Spanish inflation ... we now see Eurozone inflation falling to about zero in June," Jennifer McKeown told Reuters on Monday.
US: Consumer Confidence (14:00 GMT): Greece has cast a pall over global markets, but the case is still intact for thinking that the US will continue to post moderately stronger numbers after a weak first quarter. The Atlanta Fed’s said the chief US Economist at Capital Economics. “Moreover, spending is also being driven by a rapidly improving labor market.”
Not surprisingly, the mood on Main Street is brightening, or so it appears based on the initial June survey data for the University of Michigan’s consumer sentiment index (red line in chart below). The rise suggests that today’s update of consumer confidence from the Conference Board will follow suit.
Economists expect no less. Econoday.com’s consensus forecast sees the consumer confidence index inching up to 97.4 for the June reading. If so, the increase will strengthen the case for anticipating that the upbeat numbers on US consumption in May will continue in June.
Disclosure: Originally published at Saxo Bank TradingFloor.com
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