3 Numbers: UK Retail Steady, U.S. Mortgages, Durable Goods
James Picerno | Aug 26, 2015 01:38AM ET
The UK’s retail sector is in focus today with the monthly update of the CBI distributive trades survey, a leading indicator for this slice of the economy. Later, a couple of US releases will shed new light on real estate (via the weekly numbers on mortgage applications) and the manufacturing sector (monthly data on new orders for durable goods).
UK: CBI Distributive Trades Survey (1000 GMT): The recent turmoil in global equity markets may be weighing on economic confidence, but there’s no sign of trouble for the UK’s macro trend, according to yesterday’s revised forecast from the Confederation of British Industry (CBI). The trade group projected a slightly higher pace of GDP growth this year : 2.6% in 2015, up from June’s 2.4% forecast. Next year’s estimate also ticked higher compared with the previous outlook — CBI now expects economic growth in 2016 of 2.8%.
“We’re encouraged by the twin-engined growth of household spending, spurred by stronger wage increases and low inflation, buttressed by business investment,” said CBI’s director-general.
Today’s CBI update on the group’s distributive trades survey (DTS) — a measure of expectations for the retail industry — will stress-test the case for a firmer outlook on growth. Keep in mind that this index has weakened in recent months, which has been followed by slightly softer annual increases in the year-over-year changes in the government’s estimate of retail spending.
More of the same is on tap for today, according to Tradingeconomics.com ’s forecast for a modest dip in DTS to 18 for August, down from 21 in the previous month. But that still equates with a majority of retailers expecting higher sales in the near term (a positive number for the index reflects a majority of businesses are anticipating growth). If the forecast holds, the news will offer support for thinking that the upcoming hard data on retail spending for August will stick closely to the recent trend of roughly 4% year-over-year growth.
US: Mortgage Applications (1100 GMT):Today’s weekly update on the demand for mortgages will offer additional guidance for assessing the recent improvement in expectations for the housing sector. For the moment, the trend looks friendly. Yesterday’s upbeat numbers on new home sales for July follows encouraging reports on residential construction and sales of existing homes for last month.
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The recent trend in new applications falls in line with the bullish trend of late. In the last report, applications jumped 3.6% for the week through August 14 compared with the previous week, according to the Mortgage Bankers Association. The solid gain marks the fifth straight weekly advance.
Reviewing the numbers since early May via a linear trend line also tells us that demand has been firming lately. If today’s report reflects another gain, the outlook for continued growth in housing will strengthen.
US: New Orders For Durable Goods (1230 GMT): Today’s update on the appetite for big-ticket items could rattle nerves. Econoday.com’s consensus forecast sees new orders ticking lower by 0.4% in July, marking a mild but ill-timed reversal from June’s solid 3.4% increase.
Indeed, with investors still licking their wounds from the recent wave of selling, fresh news of weakness in one of the more cyclically sensitive economic indicators will be hard to overlook.
To be fair, the trend in new orders has been disappointing for much of the year so far. In particular, the year-over-year trend has remained negative in each of the last six updates through June. Today’s data for July is on track for a seventh consecutive run of red ink for the annual comparison. Then again, today's update is up against an unusually strong gain in the year-ago July data. Nonetheless, the monthly change is expected to sink lower by 0.4% for the headline figure, according to Econoday.com's consensus prediction.
One potential bright spot: new orders ex-transportation. The back and forth in the high-priced realm of transport can skew the numbers in the short run, which inspires looking at the trend without this slice of demand. Economists are looking for a 0.4% monthly rise here, which follows June’s 0.8% gain. That’s a thin reed for maintaining a positive outlook for manufacturing, but at the moment it’s the best that the numbers can offer.
Disclosure: Originally published at Saxo Bank TradingFloor.com
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