3 Numbers: EU CPI Supports Recovery, U.S. Chicago PMI, Dallas Fed Index
James Picerno | Aug 31, 2015 02:48AM ET
The inflation trend in the Eurozone is in focus today via the flash release of consumer price data for August. Later, a couple of US releases will offer early clues for profiling economic activity in August.
Eurozone: Consumer Price Index (0900 GMT) Last week’s update of money supply data for July suggests that the European Central Bank is maintaining the higher pace of liquidity injections that have prevailed over the past year. Broadly defined money supply (M3) rose 5.1% for the year through July – unchanged from the previous month and close to the fastest rate in recent years.
The main goal, of course, is to keep Europe’s modest recovery alive. So far, so good, based on expectations for third-quarter GDP, albeit in the wake of recently downgraded projections. Now-casting.com’s latest weekly update (published on Friday) sees a 0.32% quarter-over-quarter rise for Q3 GDP, fractionally above the previous week’s estimate. But the latest forecast is half the expected gain relative to estimates in early July.
The Bank of Italy’s monthly GDP estimate offers a modestly brighter quarter-over-quarter projection – 0.43% in the August report, which matches the official pace reported by Eurostat for Q2.
In other words, there’s still a convincing case for expecting a modest recovery.
Today’s flash estimate for consumer inflation in August will provide a fresh round of guidance. The crowd’s expecting a mild setback, however. Econoday.com’s consensus forecast for this month’s initial figures on headline inflation is on track to weaken to a flat reading vs. 0.2% in July in year-over-year terms.
But that may turn out to be noise, largely due to weak energy prices. Indeed, the core reading of the consumer price index is considerably higher, running at a 1.0% year-over-year rate through July. It’s unlikely that this measure of inflation will decelerate beyond a trivial degree, if at all, in the August profile. In that case, a cautious forecast of a moderate economic recovery for the Eurozone will remain a reasonable if still-shaky assumption.
US: Chicago PMI (1345 GMT) Last week’s economic data continues to point to a moderate but ongoing economic recovery for the US. Upbeat numbers on housing, jobless claims, and personal income and spending reaffirmed the view that the recent market volatility wasn’t a reflection of a deteriorating macro trend … at least through July.
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August’s numbers are still largely a mystery, although Markit’s purchasing managers’ indexes (PMI) for the services and manufacturing sectors still reflect a growth bias. The manufacturing sector, however, remains a weak spot, but not weak enough to inspire a negative outlook for the economic trend overall.
Gauging how (or if) the big picture is changing will take time, but today's Chicago PMI report for August will drop another clue. Although the focus is on the Chicago region, some analysts see this data as a useful proxy for the US overall, in part because the index targets the manufacturing and services sectors in one data set.
Today’s update is expected to inch higher to 54.9, up slightly from July's 54.7, according to Econoday.com's consensus forecast. As such, the report will boost the case for expecting the macro trend to remain positive through this month.
US: Dallas Fed Index (1430 GMT) For additional perspective on how this month's economic profile is shaping up, keep an eye on the final instalment for a set of regional manufacturing metrics via the Federal Reserve system. Based on this data, the August profile is looking shaky.
To date, two of the manufacturing benchmarks reflect contraction for this month (via numbers from the New York and Kansas City banks). Meanwhile, the Richmond Fed index is unchanged for August. The only positive reading: the Philly Fed index.
The fifth and final regional bank update for August arrives in today’s Dallas Fed release. The crowd’s looking for a slightly less negative reading, according to Econoday.com: minus 2.5 for August vs. minus 4.6 for July. If the prediction holds, the regional Fed figures overall will point to a still-faltering trend for US manufacturing.
Disclosure: Originally published at Saxo Bank TradingFloor.com
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