Economics Week Ahead 10/4/17Published on 10th April 2017
As we all know, no business exists in a vacuum. Whether it’s a report on UK wage pressures suggesting increased payroll costs, the US Federal Reserve looking to hike rates and influence your dollar-denominated costs for purchasing raw goods or reports of weakened Eurozone import demand, it all matters to your business. Which is why each week we bring you Economic News You Can Use.
As we pointed out last week, the big event dominating Friday’s economic calendar was the monthly release of US non-farm payroll data. Expectations had been for an 180,000 increase in US jobs, but the report disappointed hugely adding just 98,000. Retail jobs declined by 30,000 while construction was up just 6,000 after a gain of 59,000 in February. Why does this matter to you? Well, a much-talked-about aspect of the US Federal Reserve’s rate hiking plans is that they have been prepared to increase interest rates even though there has been some fragility in US economic growth. This sign of weakness in the jobs numbers has potential to check that confidence in hiking rates. With the world’s major central banks still setting super-low interest rates, if the US is increasing rates it makes it more attractive for investors to invest in dollar-denominated assets, increasing dollar strength. If you are an importer relying on dollar-denominated raw goods, or on the other side of the coin relying on dollar strength to boost US export demand, then this jobs number should have caught your attention.
The week kicks off with a fairly quiet schedule of economic data on this side of the Atlantic with the Sentix investor confidence report for the Eurozone expected to see a slight strengthening from 20.7 to 21.0.
The key event today is going to be a speech by US Federal Reserve chairman Janet Yellen. After the disappointing jobs report on Friday, the focus will be whether she maintains commitment to the Federal Reserve’s rate hike trajectory. Any wavering could knock dollar strength.
There’s a lot of key UK data out today from the Office for National Statistics. Consumer Price Index, Retail Price Index and Producer Price Index data is released and we will see if UK inflation numbers continue to increase. CPI increased by 2.3 percent year-on-year in February and it is expected that it will maintain that rate in March. Businesses will be keeping an eye on that number as it starts to exert pressure on UK wage expectations.
This morning is all about UK jobs numbers and earnings data. The unemployment number is expected to hold at 4.7 percent while earnings increases ex bonuses are expected to come in at 2.1 percent year-on-year after increasing 2.1 percent last month. This earnings number is worth looking at in conjunction with Tuesday’s inflation data – if inflation starts to increase while nominal wages slow, workers will start to feel pressure on their nominal wages which has a knock-on effect on consumer spending as wages do not stretch as far.
Not much in terms of UK specific data out today but something worth keeping an eye on is German inflation data. A source of concern for the European Central Bank has been a weakness in Eurozone inflationary pressure. A weakness in German data will provoke some nervousness from the ECB which has in recent years been proactive in knocking down the euro and importing inflation into the Eurozone through a weakened currency.
It’s Good Friday and a bank holiday in the UK and a holiday in most of Europe. Hopefully, you’ll be sat enjoying something cold in the sunshine, but if you really can’t get enough of economic data releases then US retail sales data and Consumer Price Index inflation numbers will be just the thing for you when they’re released in the afternoon. Expectations are for a bit of an increase in retail numbers with consensus expectations of a 0.3 percent increase after benign 0.1 percent growth last month.
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