Seeking A Rebound
UK economy watchers expect sizeable rebounds in both the Manufacturing (to 44.5 from 32.6 in April) and Services (44.5 from 13.4) Indices on Thursday. Furthermore, in the coming week, markets will be looking for signs of the initial impact of the easing in lockdown restrictions.
That means timelier survey data for May is likely to generate the most interest, in particular PMI data for the Eurozone, UK and US will be keenly anticipated. The final estimates due early June may show an even bigger rise as they will include data for late May. The UK data calendar is very busy all week although the other readings are less timely. That is particularly true of Tuesday’s labour market report which mostly covers the three months to March and is expected to show only a relatively modest slowing in employment and rise in the unemployment rate. The UK’s Job Retention Scheme should prevent the unemployment rate rising by as much in coming months as it has in the US. Nevertheless, it is likely to go up and April jobless claims data should provide some hints on this as reports suggest that benefit claims have risen by around 2 million since the lockdown started.
Wednesday’s April CPI data is forecast to show a sharp fall in annual headline inflation to 0.8% (from 1.5% in March) due principally to lower utility and petrol prices. A fall below 1% will mean that the BoE Governor will have to write to the Chancellor of the Exchequer explaining why the inflation target has been missed. April retail sales (Fri) are forecast to fall by a monthly record of 18% as solid grocery sales are offset by a slump in spending on most other things. Finally, April public finance data (also Fri) is expected to show a big rise in the budget deficit reflecting the rise in government spending.
US & EUROZONE PMIS ALSO LIKELY TO HAVE RISEN
US PMI data are also predicted to have picked up in May. We look for manufacturing to rise to 45.0 (from 36.1 in April) and services to 39.0 (from 26.7). The Philadelphia Fed May industrial survey may also have rebounded. We forecast a rise in the headline measure to a still very weak -35 from -55.6 in April. Weekly jobless claims data will be watched for further timely indications that the pace of the rise in unemployment is slowing. In contrast, less timely April housing data for housing starts and sales are expected to show very big falls. The minutes of the Federal Reserve’s April meeting will probably yield few surprises. However, it will be interesting to see whether there was discussion of a change in the Fed’s forward guidance and of further policy measures to be taken. We forecast fairly modest improvements in both the Eurozone manufacturing (35.0 from 33.4) and services (18.0 from 12.0) PMIs for May from extremely low levels in April. That would point to an easing in the pace of contraction as lockdown measures in some countries started to be lifted. Still, the downturn in activity remains severe and the fall in Q2 GDP looks on track to be much bigger than the 3.8% decline in Q1. In contrast, the German ZEW’s expectations reading may have slipped in May after a surprisingly strong April outturn, although the current conditions measure may improve to -85.0 from -91.5. Eurozone consumer confidence is likely to have fallen in May for a third successive month.
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None of the information in this article is, nor should be construed as financial advice. All foreign exchange transactions involve risk and you should always seek your own independent financial advice before entering into any foreign exchange transaction.
