3 Numbers: EZ Inflation Heading Up, U.S. Store Sales, Factory Orders
James Picerno | Jun 02, 2015 02:38AM ET
Grexit risk is still lurking as an end-of-week deadline for a debt repayment approaches, but Europe’s headline inflation trend is expected to co-operate today with the first positive year-over-year reading in six months. Meanwhile, the shaky second-quarter recovery in the US is in focus again today with two releases: retail spending via the Redbook Index and the monthly release on factory orders.
Eurozone: Consumer Price Index (09:00 GMT): Yesterday’s revised sentiment numbers for the Eurozone's manufacturing sector in May is a reminder that the economic recovery still faces challenges. The good news is that there’s still a recovery to speak of. Markit’s final estimate for last month’s purchasing managers’ index (PMI) for manufacturers in the euro block ticked down to 52.0 from 52.3 in the flash estimate. That’s still comfortably above the neutral 50.0 mark, but no-one will mistake the latest data as a sign that the recovery is accelerating beyond a modest bounce.
“The survey data point to a quarterly rate of industrial growth of approximately 0.5 percent,” said Markit’s chief economist. “This should help drive [Eurozone] GDP higher in the second quarter, perhaps matching the 0.4 percent rise seen in the first three months of the year."
In fact, now-casting.com’s latest estimate for second-quarter GDP growth is a bit higher: 0.5 percent. Meanwhile, the Euro Coin’s proxy of the macro trend is also looking brighter: this monthly GDP estimate for May ticked up to nearly 0.4 percent — the sixth rise in as many months.
The obvious risk factor, of course, is Greece. Various deadlines have come and gone, with yet another one due at the end of the week. Yet this soap opera has yet to unleash dire effects on the Eurozone, so far.
The potential for trouble, of course, endures and so it's not clear if the past is prologue. It’s anyone’s guess how this plays out as the potential for bankruptcy (and leaving the euro) marches higher. Whatever happens, the best-case scenario is a Europe that’s generally on the mend when or if the worst-case outcome arrives.
Today’s update on inflation is expected to make a contribution on the positive front. The flash estimate of headline year-over-year change for the consumer price index is on track to post its first positive reading since last November — a mild 0.2 percent rise, based on Econoday.com’s consensus forecast.
A minor victory, if today’s release confirms the prediction. As such, the news will offer more evidence that Europe is genuinely recovering. It’s unclear if that will soften the blow from a Grexit, although it will surely help if the currency union is pushed to the brink in the weeks ahead.
Get The News You Want
US: Redbook Retail Index (12:55 GMT): Consumer spending was flat in April, the Bureau of Economic Analysis advised yesterday, news that fueled worries anew that the US economy is still struggling to right itself after a decline in economic output in the first quarter.
“Consumer spending remains a bit restrained,” explained this week. "Most likely, Americans are using their pump price savings to pay down debt, increase the money they put aside, and for dining out.”
US: Factory Orders (14:00 GMT): Demand for durable and nondurable goods has been falling in recent months, but there’s a slight hint that a recovery may be bubbling. Factory orders posted a solid gain in March, rising 2.1 percent compared with the previous month — the best monthly gain since last July. The year-over-year trend remained negative, as it's been since November. But there’s a whiff of improvement in the air.
Or at least there was. But economists recommend managing expectations down for this indicator. Briefing.com’s consensus forecast sees orders as unchanged in April. Maybe so, but sentiment data for last month suggests that a weak April for orders will bounce back soon after.
Why? Yesterday’s updates on the mood in the manufacturing sector inched higher last month. The ISM Manufacturing turned higher May, rising to a three-month high. Markit’s PMI ticked down for last month, although it continues to reflect a solid pace of growth.
Does the sentiment data for May lay the groundwork for a stronger run of factory orders?Perhaps, although the positive clues are expected to be in short supply in today’s release for April.
Disclosure: Originally published at Saxo Bank TradingFloor.com
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.