3 Numbers: US Jobless Claims Fall Supports Case For December Rate Hike
James Picerno | Nov 19, 2015 03:31AM ET
Thursday’s a busy day for economic news, starting with the monthly update on retail spending for the UK. Later, two US reports—jobless claims and the Philly Fed Manufacturing Index—will receive close attention for deciding if the case for a December rate hike is still viable.
UK: Retail Sales (0930 GMT): The UK economic trend continues to hum along at a solid pace, according to the National Institute of Economic and Social Research. GDP rose a healthy 0.6% in the three months through October, the group advised earlier this month. “This implies that reasonable economic growth has continued into the fourth quarter of 2015,” NIESR reported, noting that the latest data puts the economy on track to rise 2.4% for this year.
The trend is expected to tick lower to a 2.3% increase in 2016, but for the moment the macro trend for Britain still looks upbeat, NIESR said. “Domestic demand will continue to be the main driver of growth this year and next as households take advantage of purchasing power improvements from the low inflationary environment and firms continue to invest.”
Today’s update on retail spending for October is expected to support that narrative. Although the crowd’s looking for the year-over-year gain in the volume of retail sales to decelerate, the downshift follows an unusually strong rise in the previous month, when spending surged 6.5% vs. the year-earlier level.
Econoday.com’s consensus forecast calls for a 4.0% annual growth rate in October spending. That may end up a bit lower in the actual figures, or so the October sentiment reading for retailers suggests. The CBI distributive trades survey sales balanced tumbled to a positive 19 last month--the lowest since April. But the slide follows a sharp gain to a 10-month high in the previous month.
There’s a fair amount of volatility in consumer spending these days, but so far this year the surprises have been bullish. Given recent history, a slowdown in growth in today’s update from the government won’t rattle the positive sentiment that’s been supporting the retail industry for much of the year to date.
US: Philadelphia Fed Manufacturing Index (1330 GMT): Monday’s disappointing update on manufacturing activity in the New York Fed region suggests that the case is still weak for expecting a rebound in this month’s data overall. The headline index for the Empire State Survey barely budged in November from the previous month’s deeply negative reading. The crowd was expecting something better.
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Ditto for today’s report for the Philly Fed region. Econoday.com’s consensus forecast calls for rebound to zero for this regional index from negative 4.5 in October. If the forecast holds, the news will provide a timely counterpoint to the ongoing weakness in this month’s New York Fed release. But if the numbers disappoint a second time this week, the case will strengthen for expecting that the negative trend for manufacturing will roll on.
“The only saving grace is that the NY Fed district is a small minority of the overall manufacturing sector, so there may be some issues specific to business conditions in the region or the specific subsectors in the region that are causing the weakness in the index,” noted an economist at Jefferies on Monday. “We do not think that this is a harbinger for the November ISM Manufacturing Index when it is released at the beginning of December.”
The question is whether today’s report from the Philly Fed falls in line with that positive spin?
US: Initial Jobless Claims (1330 GMT): Two of this week’s key economic reports—industrial production and housing starts—have dispensed mixed messages, raising a new round of doubt about the prospects for a rate hike at next month’s FOMC meeting. The wobbly numbers follow last week’s surprisingly soft increase in retail sales for October.
Is there still case for a rate hike at next month’s Fed meeting? In search of fresh perspective the crowd will be keenly focused on today’s weekly update on jobless claims.
The rear-view mirror suggests that new filings for unemployment benefits remain at the leading edge of bullish macro indicators. Although claims have climbed recently, the back-to-back readings at 276,000 for each of the last two weeks is close to a multi-decade low. That’s a signal for expecting that the labour market will continue to post solid gains, even if the recent figures from other corners suggest otherwise.
Today’s claims report is expected to deliver another round of optimism. Econoday.com’s consensus forecast calls for a modest decline of 6,000 in new filings to a seasonally adjusted 270,000. If so, the news will offer a degree of comfort for thinking that the previous economic releases are noise rather than clues for expecting stronger macro headwinds.
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