Today’s update on factory orders for Germany will refocus attention on Europe’s biggest economy. Meanwhile, the release of US jobless claims data will be closely read ahead of tomorrow’s official report on payrolls for September. In addition, keep your eye on GBPUSD, which fell to a 31-year low this week against the US dollar.
No acceleration. Economists are sceptical that Germany's upbeat mood for the
manufacturing sector will show up in today's factory orders release. Photo: iStock
Germany: Factory Orders (0600 GMT) Sentiment data for the manufacturing sector points to a pickup in output and new orders, according to this week’s release of PMI sentiment data for September. “A key driver of the stronger PMI reading was an acceleration in growth of new business,” advised IHS Markit. “The pace of expansion was among the fastest seen over the past two-and-a-half years.”
Will the upbeat mood translate into firmer numbers for factory orders? Economists are sceptical, at least for today’s release. Econoday.com’s consensus forecast sees new orders slipping 0.2% in August vs. the previous month.
The monthly and annual comparisons for orders have been more or less flat to negative recently and today’s data looks set to follow in that tradition. The year-on-year trend has been particularly weak, posting declines in three of the past four updates.
But firmer numbers may be coming. The upbeat PMI report is effectively forecasting that Germany’s manufacturing sector will soon spin noticeably faster. But if analysts are right, the revival won’t show up in today’s release.
US: Initial Jobless Claims (1230 GMT)
Private-sector payrolls rose less than forecast in September, according to yesterday’s update
of the ADP Employment Report. The moderate gain of 152,000 is a decent advance, but the crowd was looking for a stronger rise. The modestly disappointing ADP data implies that Friday’s official numbers on September’s payrolls may fall short of projections as well.
The smallest gain in private payrolls since April via ADP's reckoning may be a reason to worry, but the chief economist of Moody’s Analytics, which co-produces the data with ADP, prefers to see the upside potential in spite of the softer numbers.
“With job openings at all-time highs and layoffs near all-time lows, the job market remains in full-swing,” said Mark Zandi in a press release. “Job growth has moderated in recent months, but only because the economy is finally returning to full-employment.”
The data for layoffs is expected to remain a bullish factor, based on estimates for today’s weekly release on jobless claims. Briefing.com’s consensus forecast calls for a slight uptick in new filings for unemployment benefits, but the projection for a rise of 2,000 will leave claims at a modest 258,000, which is close to the lowest level since 1973.
In short, this leading indicator appears set to deliver another dose of bullish enthusiasm for the labour market outlook.
The British pound touched a new multi-decade low against the US dollar this week. The catalyst for the latest leg down has been widely reported as Prime Minister Theresa May's outline on Sunday that discussed the plan for turning June’s Brexit vote into reality.
A weaker currency has benefits, of course, primarily as a source for boosting the competitiveness of British exports in foreign currency terms. The September reading of the UK Manufacturing PMI certainly sent a bullish message: the sentiment index jumped to its highest level last month since mid-2014. “The weak sterling exchange rate remained the prime growth engine, driving higher new orders from Asia, Europe, the USA and a number of emerging markets,” noted
an economist at IHS Markit.
Too much of a good thing can, at some point, backfire, but for good or ill the pound’s downside trend remains intact vs. the US dollar. Indeed, GBPUSD continues to trade well below key moving averages, which suggests that a meaningful rebound for the pound is unlikely any time soon.
As an analyst at Amplifying Global FX Capital noted
on Wednesday, “sterling has finally and belatedly responded to the heightened and prolonged Brexit uncertainty, notwithstanding a resilient UK economy and prospects of significant UK fiscal stimulus.”
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– Edited by Gayle Bryant
James Picerno is a macro analyst/editor at CapitalSpectator.com. Follow James or post your comment below to engage with Saxo Bank's social trading platform.