Article / 08 September 2016 at 5:00 GMT

3 Numbers: Slowing growth to keep ECB policy rate unchanged

editor/analyst /
United States
  • Economists expect no major announcements or changes from the ECB today
  • US jobless claims are projected to tick higher but remain close to a 43-year low
  • Confidence Index will offer more context on US outlook after weak reports

By James Picerno

The European Central Bank’s policy announcement and press conference is the main event for today’s economic news.

Later, two US reports will be closely read after a string of disappointing economic updates.

First up is the weekly release on jobless claims, followed by a weekly measure of the mood on Main Street via the Bloomberg Consumer Comfort Index.

European Central Bank Announcement & Press Conference (1145 GMT & 1230 GMT) No change is expected in today’s policy announcement from European Central Bank (ECB), but plenty of questions about the euro area economy will continue to resonate.

GDP growth in the second quarter slowed to 0.3% from 0.6% in Q1, official data confirmed this week, and the outlook for Q3 anticipates more of the same.’s September 2 estimate projects economic activity in the July-to-September period decelerating further to 0.21%.

Markit’s survey data anticipates a slightly firmer trend: 0.3% growth for Q3.

Nonetheless, the Eurozone Composite PMI through August indicates that the economy’s already sluggish pace is losing momentum. “Inflationary pressures are also cooling amid intense competition, and hiring is on the wane as businesses grow more concerned about the outlook,” Markit’s chief economist said last week.

Nonetheless, the crowd’s expecting the ECB to leave its policy rate as is at 0.0%, although analysts think there's a possibility that the bank’s Asset Purchasing Program may be extended beyond the current end date of March 2017.

 Same old, same old: The ECB has little left to counter economic stagnation. Photo: iStock

But with a dwindling supply of assets eligible for purchase under ECB’s current rules, the opportunities on this front are limited.

That’s not necessarily a problem, a growing number of economists argue. “Quantitative easing has some downside effects for the profitability of banks,” warned the chief economist at Fitch Ratings at a conference this week.

“It may not spur bank lending as strongly as you would expect.” In any case, “there is definitely a concern here at the margin that we shouldn't really be looking to the central banks to help us get over the final hurdle of pushing growth back up,” said Brian Coulton.

For good or ill, Europe’s central bank appears to be backed into a corner (assuming it doesn’t dive deeply into negative interest rates). As a result, ECB president Mario Draghi faces a challenging environment for convincing the crowd that monetary policy is still relevant.

Perhaps he can make a convincing case otherwise in today’s press conference that follows the central bank’s official policy statement.

US: Initial Jobless Claims (1230 GMT) Economic reports continued to deliver weaker-than-expected numbers this week. Will today’s update on new filings for unemployment benefits break with the downbeat trend?

Yes, according to economic projections.’s consensus forecast sees jobless claims rising a mere 1,000 to a seasonally adjusted 264,000, which is still close to the 43-year-low of 248,000 that was touched back in April.

If the actual claims data sticks close to the forecast, the news will provide a degree of relief after disappointing economic updates in recent days.

In addition to last week’s surprisingly soft gain in nonfarm employment in August, the Federal Reserve’s Labor Market Conditions Index dipped back into negative territory last month.

Meanwhile, the services sector in August registered a sharp slowdown in growth. The ISM Non-Manufacturing Index fell to 51.4 last month.

Although that’s still in growth territory (just barely), the reading marks the slowest expansion for the sector since February 2010.

“The latest set of ISM numbers is shockingly weak,” said the chief US economist at Maria Fiorini Ramirez, an economic consultancy. “It certainly gives the doves at the Fed more ammunition. It makes the Fed’s conversation at the September [20-21] meeting that much more contentious.”

The question is whether the claims data, which has been a steady source of macro optimism this year, will continue to provide a bullish counterpoint to the gloomy numbers of late? The market’s expecting no less.

US: Bloomberg Consumer Comfort Index (1345 GMT) For another perspective on the US economy, today’s update on the mood in the consumer sector deserves attention.

At issue is whether the recent run of soft data reflects a continuation of sluggish growth or something darker.

If there’s trouble brewing, the Consumer Comfort Index (CCI) may give an early warning. At the moment, however, this weekly benchmark has been in a holding pattern at modestly firmer levels, albeit with relatively high volatility over the past month.

CCI fell sharply last week after rising the week before to its highest level since April 2015. The implication: Households have become a bit more worried lately about the outlook for the economy.

Note, however, that a new poll from Gallup yesterday reported that its Job Creation Index held steady at a post-recession high.

Meanwhile, the Gallup US Economic Confidence Index rose to a five-month high in August. The comparatively firm numbers from the polling firm suggest that it’s unlikely that troubling news awaits in today’s CCI release.

-- Edited by Adam Courtenay

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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