Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Article / 07 July 2016 at 5:05 GMT

3 Numbers: Flat May in store for German industry

editor/analyst /
United States
  • Economists expect that German industrial output will be flat in May
  • Slower growth is projected for ADP’s estimate of US private employment for June
  • The ADP data will influence expectations for Friday’s official employment report
  • NIESR GDP data for the UK will show the macro trend as the Brexit vote unfolded

By James Picerno

Thursday’s a busy day for economic news on both sides of the Atlantic. The rush of numbers begins with the monthly update on German industrial activity in May. Later, ADP’s estimate of private employment in the US for June will be widely read ahead of tomorrow’s official release from the Labour Department. In the UK, the monthly GDP estimate from the National Institute of Economic and Social Research will shed more light on how Britain’s economy was faring as the Brexit vote arrived.

Germany: Industrial Production (0600 GMT) The weaker-than-expected rebound in factory orders in May raises new doubts about the strength of Germany’s economic growth for the rest of the year.

The NIESR June update is unlikely to show any impact from the Brexit vote on the UK economy, although any pre-vote reluctance to invest could have impacted the data. Photo: iStock

Orders were flat in May (in real seasonally adjusted terms) vs. the previous month. Although the unchanged reading is an improvement over April’s 1.9% slide, economists were expecting a 1.0% bounce in May. Is the disappointing report a sign that Germany’s economy is headed for slower growth in this year’s second half? The crowd will be looking for a new clue in today’s numbers on industrial production.

Upbeat news, however, is expected to be in short supply. Analysts are projecting no change for industrial output, according to's consensus forecast.

Downsizing expectations is no surprise after the factory orders data. ING-DiBa economist Carsten Brzeski concludes that “the German industry is treading water.”

Survey data, on the other hand, points to a stronger profile in June. The Markit/BME Germany Manufacturing PMI jumped to a 28-month high last month, reflecting stronger growth in output and new business. The question is whether the upbeat PMI numbers will divert the crowd’s attention from what could be another round of discouraging hard data in today’s release.


US: ADP Employment Report (1215 GMT) Friday’s US employment report could bring more disappointment, according to Saxo Bank’s chief economist, Steen Jakobsen. Yesterday he said that there’s a risk that June payrolls will rise by only 100,000 or so—far below’s consensus forecast for a 180,000 pop.

The logic for the weak forecast, he explained, starts with the Federal Reserve’s Labour Market Conditions Index, which fell to a seven-year low in May.

If Jakobsen's worrisome forecast is accurate, we may see a tumble in today’s ADP data. Note, however, that’s consensus forecast calls for a gain of 150,000, a moderately lower number vs. the 173,000 advance in May, but hardly a smoking gun.

Whatever the ADP data shows, the report will influence expectations for Friday’s official employment report. Optimists argue that the dramatic decline in job growth in May—a rise of just 38,000—is noise. The first installment on deciding if that’s wishful thinking or informed analysis starts with the ADP release.

UK: NIESR GDP Estimate (1400 GMT) Cutting estimates for UK economic growth is in high gear in the wake of the Brexit vote.

Blackrock this week wrote that its "Macro GPS 'nowcasting' indicator suggests Brexit-related uncertainty has already started to negatively impact UK and global economic growth."
Meanwhile, the IMF’s managing director on Monday warned that GDP is on track to lose between 1.5% and 4.5% by 2019.

But it’s another story when we look at the monthly GDP estimates from the National Institute of Economic and Social Research. The London think tank’s latest projection, in fact, ticked up to a 0.5% GDP growth for the three months through May. But that was before the Brexit vote.

Will today’s update for June reflect a darker outlook? Perhaps not, or at least not yet. The Brexit vote was on June 23, which implies that any Brexit-related fallout will arrive in July at the earliest. Then again, if the crowd was anticipating trouble and pared spending and investment in advance of the vote, the June GDP estimate could suffer.

In any case, today’s report deserves attention, if only for evaluating how the UK economy was faring in the last month of the old world order.

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– Edited by Robert Ryan

James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


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