Macroeconomics: The Day Ahead for 21 June

It is Midsummer’s Day, and there is a relatively busy end to the week in statistical terms, featuring G7 & India flash PMIs, along with UK GfK Consumer Confidence, Retail Sales and PSNB. There are also Japan’s national CPI and French Business Confidence to digest, with US Existing Home Sales and Canadian PPI and Retail Sales ahead. The events schedule is by contrast quite light with a smattering of Fed and ECB speakers, and a regular EU Economic and Financial Affairs Council (Ecofin) meeting. Next week brings a hotch of data and surveys, with the US looking to Personal Income & PCE, Consumer Confidence, Durable Goods Orders, House Prices and New and Pending Home Sales. In Europe and the UK surveys dominate with Germany’s Ifo, UK CBI Industrial Trends & Distributive Trades, EC Confidence among the highlights. Japan looks to the usual end of month data rush: Tokyo CPI, Industrial Production, Retail Sales and Unemployment, while Australia has CPI. There will be an abundance of Fed and ECB speakers, the BoE publishes its Financial Stability Report and the week ends with a 2-day EU leaders summit as well as the first round of the French General Election next Sunday (with the UK voting the week after). The commodities sector has USDA Q2 agricultural inventories and various monthly Livestock reports, Brazil’s Unica Sugar production report, and Canada’s Statcan updates on grains and oilseeds seeded areas.

** U.K. – May Retail Sales, June GfK Consumer Confidence **

– Today’s Retail Sales and GfK Consumer Confidence follow on from the BoE’s ‘finely balanced’ decision to keep Base Rate on hold at 5.25%, but clearly left the door firmly open to an August rate, with the statement’s omission of the prior observation that indicators have been ‘moving in the right direction’ doubtless due to the constraints of the general election campaign. Retail Sales were much better than expected at 2.9% m/m, with the upward revision to April to -1.8% m/m and added bonus and overall pointing to a flattish trend in consumer goods spending, and per se an improvement relative to Q4 and Q1, doubtless assisted by falling household energy prices and robust wages gains. The uptick in Consumer Confidence was paced above all by optimism on the Economic Outlook, even if the Personal Finances Outlook trimmed much of the May jump (4 vs. 7), and probably reflects optimism about a change of government more than a material improvement in the economy.

** G7 / India ‘flash’ PMIs **

– India’s PMIs continued to show a robust expansion in both Manufacturing and Services, and no reaction to the surprise election. But elsewhere (Eurozone, Japan and Australia) there were sharper than expected setbacks above all in the Eurozone, whether the latter reflects an actual slowdown in demand, or perhaps more likely concern about the outcome of the snap French elections is matter for some debate, but certainly adds to the case for further ECB rate cuts, even if the pace of cuts will be deliberately slow. Outside of an expected mean reversion type fall in the US Services PMI (53.4 s. 54.8) after May’s jump, UK and US readings see a modest Manufacturing expansion, and reasonably solid Services growth.

** U.S.A. – May Existing Home Sales **

– Following on from the weaker than expected NAHB index and the fall in Housing Starts and Building Permits, Existing Home Sales are seen lower, with the steep 7.7% m/m fall in April Pending Home Sales predicating expectations of a further -2.2% m/m drop in Existing Home Sales.