Article / 04 August 2015 at 5:01 GMT

3 Numbers: UK housing uptick, EU PPI, US factory orders

editor/analyst /
United States
  • UK housing prices may perk up after a year of decelerating growth
  • Deflation should deepen slightly in today’s update for Eurozone producer prices
  • US factory orders are on track to rise in June after two monthly setbacks

By James Picerno

UK housing prices are in focus today with the July update from Nationwide. Later, we’ll see new numbers on Eurozone producer prices and the monthly release on US factory orders.
UK: Nationwide House Price Index (06:00 GMT) Britain’s economy continues to expand at a healthy pace, according to the government’s estimate of GDP through the second quarter. Output grew at a real 0.7% rate for the three months through June – a solid improvement over Q1’s 0.4% pace.

A rise in US factory orders would be a welcome turnaround following recent softness in
 this corner of the economy. Photo: iStock

The upbeat trend provides an encouraging backdrop for the UK macro outlook, but a positive tailwind for the big picture doesn’t change the fact the housing market continues to cool in terms of price increases. Once again, the Nationwide House Price Index (HPI) decelerated in June, advancing just 3.3% against the year-earlier level. That’s the slowest gain in two years and well below May’s 4.6% increase.

“House price growth continues to outpace earnings, but the gap is closing, helped by a pickup in annual wage growth, which moved up to 2.7% in the three months to April from 1.9% at the start of the year,” Nationwide noted in last month’s release.

By some accounts, economic growth is strong enough to warrant a rate hike at some point in the near term. Economist Roger Bootle thinks that policy tightening may begin sometime in 2016. When the rate hikes do arrive, house prices “are going to come under pressure,” he predicts.

That's a reasonable assumption, but the deceleration in prices is expected to take a breather in today’s HPI update for July.’s consensus forecast calls for a 3.5% annual rise, a modest uptick from June. But short of a dramatically faster pace of economic growth overall – an unlikely prospect – the price trend for Britain’s housing market is on track to remain subdued in the months ahead.


Eurozone: Producer Price Index (09:00 GMT) Deflation risk has faded this year, but there’s still more work to do. Although the year-on-year changes in consumer prices have returned to a slightly positive territory in recent months, deflation continues to weigh on the industrial sector.

Producer prices slumped 2% in the year through May. That’s an improvement on the 3.5% slide in January. But the fact that deflation continues to pinch the industrial corner of the Eurozone's economy is a reminder that the economic rebound this year is still modest.

The good news is that a number of forecasters tell us that the recovery will endure., for instance, is currently projecting that quarter-on-quarter GDP growth for the Eurozone will remain at roughly 0.4% to 0.5% in Q2 and Q3 – more or less matching Q1’s pace. But while the expansion looks poised to continue, a 0.4% pace is modest at best, which means that macro momentum remains precarious.

How precarious? Today’s PPI release will offer some guidance. Some economists expect that the 2.0% year-on-year rate of deflation will tick lower, which would mark the first slide in the annual comparison since January. Granted, a steeper rate of decline for industrial prices is hardly a smoking gun. Nonetheless, even a mild round of backtracking for PPI will serve as a reminder that weak economic recovery may remain in low gear for some time.


US: Factory Orders (14:00 GMT) Yesterday’s July report on manufacturing activity throws cold water on the idea that this cyclically sensitive sector is rebounding after a sluggish run of growth in the first half of the year. The ISM Manufacturing Index unexpected declined to 52.7 last month. That’s still comfortably above the neutral 50.0 mark, but the latest reading reflects the slowest pace of growth since April.

The soft ISM data casts doubt over the sector’s outlook, but economists are anticipating better news in today’s June release on factory orders. reports that analysts are projecting an 1.8% rise in June against the previous month. Any increase would certainly be welcome after two straight months of falling orders and red ink for the year-on-year comparison since last November.

It’s too soon to say if manufacturing's modest growth will pick up in the months ahead, but yesterday’s survey data from Markit Economics hints at the possibility. In contrast with the ISM figures, the US Manufacturing Purchasing Managers’ Index (PMI) inched higher in last month’s reading. In addition, the PMI data revealed a sharp rise in production and a strong gain for new work.

Manufacturing overall is still caught in a relatively slow phase of growth. But if today’s update on factory orders matches the crowd’s expectations, we’ll have fresh guidance for thinking that the second half of the year could bring stronger results.


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– Edited by Robert Ryan

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


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