1) Japanese Household Spending
2) U.K. Industrial Production
3) U.K. Manufacturing Production
4) Canadian Net Change In Employment
5) U.S. Non-Farm Payroll
6) Canadian Ivey Purchasing Manager’s Index
1. Japanese
Overall Household Spending (MoM) (JUN) (5:00 GMT, 1:00 EDT)
Consensus: -0.3%
Previous: 0.8%
Outlook:
Household spending in Japan is expected to decline in June, despite indicators
that normally suggest the opposite. Labor cash earnings and overtime earnings
both accelerated for the year in June by 1.1 percent and 2.1 percent,
respectively, while the consumer price index declined 0.1 percent for the
month, suggesting higher real income. Increased income alone may not be
enough, however, to drive up consumer spending, which has been identified as
the fuel for growth in the Japanese economy. With that said, the decline may
ultimately counteract previous speculation of future increases in inflation
and expansion, in light of more minor considerations that the figure may be a
simple monthly retracement.
Previous:
Household spending jumped higher than expected in May, as Japan’s consumers
were less pessimistic as the outlook for wages and employment improved. Better
job prospects were encouraging households to spend more as firms reported
higher quarterly income. Consumer spending accounted for half of Japan’s 5.3
percent annualized growth rate in the first quarter 2005, and economists
expected strong spending to continue underpinning economic growth.
2. UK Industrial
Production (MoM) (June) (8:30 GMT, 4:30 EDT)
Consensus: 0.0%
Previous: 0.1%
Outlook:
Economists expect the industrial sector of the UK economy to have remained
depressed during the month of June as well. Rising costs associated with
surges in the price of oil, on top of already weak demand, looked to have
contributed to continuing lackluster conditions for the sector. Additionally,
June indicators have relayed mixed signals so far, with the PMI manufacturing
survey showing a slight improvement, while the CBI distributive trades survey
highlighting an abrupt drop in domestic orders.
Previous:
U.K. industrial production practically stalled in May as record oil prices
pushed factories' costs higher, subsequently contributing to faltering
consumer spending. Oil prices near $60 a barrel have negatively influenced
production and tempered domestic demand for British goods by leaving consumers
with less disposable income, jeopardizing regional expansion. Factories' raw
material costs rose 0.3 percent in May from April, while prices at the factory
gate fell by 0.2 percent. Already on a downward sloping trend, the figure
looks to contribute, at least in part, to future Bank of England rate
decisions as it is reflective of consumer and global demand.
3. UK
Manufacturing Production (MoM)(June)(08:30 GMT, 04:30 EDT)
Consensus: 0.1%
Previous: 0.0%
Outlook:
U.K. manufacturing production is predicted to have gained slightly in June
after a month of being unchanged, with any potential growth looking to be
tempered by oil prices at record-highs and a drop in overall optimism. Crude
oil traded at an all-time high of $60.54 in the month as constrained
production could not meet international demand. As a result, many felt that
increased costs would weigh heavily on industrial and manufacturing producers’
profit margins. Such a pessimistic view was well-reflected in the drop of the
PMI manufacturing survey to 49.2. A decline below the neutral 50 reading
indicates that manufacturing managers feel that production will decline in the
coming months. This may not come as a surprise to many, however, as UK
manufacturing saw production fall 1.7 percent on a yearly basis in May.
Sentiment remains bearish on the sector with few expecting any significant
recovery for the sector in the foreseeable future.
Previous:
Manufacturing output remained unchanged on a monthly basis in May, but
production fell 1.7 percent from the year before. High input prices slashed
profitability and cut general outlook on the UK manufacturing sector. It is
unlikely that production will pick up in the coming months as world markets
seem determined to keep oil prices at or near record highs. General
sluggishness in industrial and manufacturing output is clear with little
monthly improvement and readings significantly below 2004 figures.
4. Canadian Net
Employment Change (JUL) (11:00 GMT, 7:00 EDT)
Consensus: 20.0K
Previous: 14.2K
Outlook:
The Canadian net employment is expected to amount to a gain of 20,000 in July,
with the unemployment rate holding steady at the post-1976 low of 6.7 percent.
A gain like this would help dispel notions that the economy was slowing down
in the middle of the second quarter and may prop up expectations of third
quarter growth. Service sector job growth should account for a large portion
of hiring, with manufacturing, once again, creating a drag as auto retooling
remains a factor, and oil prices have remained high enough to impact bottom
line profit margins.
Previous:
Analysts expected Canadian job growth to slow, but not at the level it
actually did. The Ivey PMI unexpectedly improved on the month, moving from
62.0 to 63.3 in June, suggesting that managers expected higher production in
the coming months. This was suggestive of an optimistic signal for employment
levels in manufacturing, but did not appear to translate into actual hiring.
Complications came from skyrocketing oil prices, and while the country
traditionally benefits from high oil prices, Canadian industry and
manufacturing could feel the pinch as their input prices were on the rise.
5. US Nonfarm
Payrolls (MoM) (JUL) (12:30 GMT, 8:30 EDT)
Consensus: 180K
Previous: 146K
Outlook:
Payroll growth is expected to increase yet again this month to 180,000 from
146,000 in June while the unemployment rate is likely to be left unchanged at
5.0%. Unlike the previous two months, there’s good reason to believe that the
forecast will actually at least be met this time. Taking a look at data
leading up to this release, we see that hiring in manufacturing picked up
after the ISM employment component moved up 3.3 points into growth territory
after being below 50 for the past two months. The non-manufacturing ISM
employment index declined only slightly to 56.2 after being at a four-month
high of 57.4 in June. This month’s strength and perhaps some hiring activity
left over from last month should drive job increases in service-producing
industries. Also, looking at the jobless claims data, four-week averages of
both initial and continuing claims declined in the month of July and weekly
initial claims were lower than forecasts for the last 2 weeks of the month.
All signs are pointing to a positive payrolls report, but with such high hopes
already in place, it will be interesting to see how markets react to the news.
Previous:
June’s nonfarm payrolls came in below estimates again at only 146,000 compared
to a median Bloomberg economist estimate of 200,000. This amount of monthly
job growth keeps this year’s average just barely under 2004’s. Looking deeper
into the number, we see a greater-than-expected loss in manufacturing of
24,000 jobs. This leaves June’s preliminary seasonally adjusted employment
level at 14.27 million for manufacturing, which is the lowest it has been in
nearly 55 years. Most of the decrease is employment was from automakers
shutting down factories to make preparations for the production of 2006
models. The effect from this event should be quite temporary and overall labor
conditions are expected to remain strong. The less volatile unemployment rate
actually declined in the month to a near four-year low of 5.0% while weekly
earnings remained steady and hourly earnings increased by the same rate of 3
cents that was seen in May.
6. Canadian Ivey
Purchasing Managers Index (July)(14:00 GMT, 10:00 EDT)
Consensus: 53.0
Previous: 63.3
Outlook:
Analysts expect a significant drop in the Ivey purchasing managers index as
industrial and manufacturing production posted mediocre performances from May
to July. Relevant indicators showed that manufacturing shipments fell 0.1
percent, as wholesale sales dropped from 0.9 percent to 0.2 percent growth
from April, and retail sales posted a substantial 1.3 percent loss in May.
Business confidence likewise disappointed with readings well below
expectations at -10.0 in July. Overall it seems that high raw materials costs
and an appreciated Canadian dollar weigh heavily on production and exports.
Regardless, the Canadian economy continues to grow at a healthy rate,
indicating that domestic growth may be enough to drive expansion.
Previous:
The Ivey purchasing managers’ index showed an increase in Canadian business
and government spending in June as the reading improved from 62.0 to 63.3.
Such a reading implies that managers are confident that production would
increase in the coming months. This is relatively optimistic in light of
several relevant indicators showing declines in recent months. As a result, it
seems that many managers may be growing pessimistic as exports fail to grow
and margins decrease on higher input costs.
