Ole Hansen
Commodities have faced a torrid year and there’s no let up in sight warns Saxo’s Ole Hansen. While the price of crude has stabilised this week, Libya and the forthcoming OPEC meeting are keeping up the pressure. Other event risks including the ECB and FOMC meetings are also adding general commodity price pressures, he says.
Article / 02 April 2014 at 4:42 GMT

3 Numbers To Watch: UK house prices, Spain jobs, US ADP payrolls

editor/analyst /
United States

• UK housing recovery a source of strength for economy
• Spain remains vulnerable to setbacks
• ADP private payroll data could disappoint

Britain’s housing recovery will receive new attention with the release today of March data for the Nationwide Home Price Index. Later, we’ll see updates on the unemployment trend in Spain and ADP’s estimate of private payrolls for the US. In the meantime, keep in mind that revised data for Q4 2013 GDP in the Eurozone arrives today at 09:00 GMT.

UK Nationwide Home Price Index (06:00 GMT) The recovery in Britain’s housing market has been a source of strength and encouragement, but policymakers are becoming anxious. The Bank of England’s Financial Policy Committee last month noted the “continued evidence of increasing momentum in the UK housing market” and pledged to “remain vigilant to emerging vulnerabilities” and “take further proportionate and graduated action if warranted”.

Rising prices could, at some point, trigger a policy response from the central bank, although such action in the near term is a low-probability event. Or so it seems based on the decelerating rate of growth in house prices lately. In the first two months of this year, the Nationwide House Price Index (HPI) posted sharply slower monthly increases. Prices rose 0.6 percent (seasonally adjusted) in February versus the previous month — the slowest pace since last June.

Is the deceleration in monthly prices a sign that the housing boom has passed its peak? Maybe, although the year-over-year trend is still climbing. Nationwide’s HPI jumped 9.4 percent in February over the year-earlier level — the most in nearly four years. Perhaps today’s update for March will provide new perspective for deciding if the housing market boom is set to cool.


Spain Unemployment Change (07:00 GMT) Spain’s economy will grow 1.2 percent in 2014, the Bank of Spain predicts in its latest forecast. A key assumption in the estimate is the outlook for a 1.1 percent rise in private consumption this year. "Among the components of private demand, it is envisaged that household consumption will grow in 2014 and 2015 following decreases in the three preceding years," the central bank advised in the March issue of the Economic Bulletin. Deciding if that’s a reasonable forecast starts by watching today's profile of the labour market in Europe’s fourth-largest economy.

Indeed, the monthly update on the change in the population of jobless workers will be closely watched for evaluating the state of Spain’s tentative recovery. A number of encouraging numbers in recent months suggest that the economy has finally turned the corner. Employment in February, for instance, posted its first positive annual comparison in six years. "That was the number that the government has been waiting for," Marcel Jansen, a professor of economics at Madrid’s Autónoma University, told the Financial Times last month. “For us to be able to talk about a clear change in the tendency we had to see a year-on-year change in the situation.”

Meanwhile, Spain’s manufacturing sector is growing again for the first time in several years, according to data from Markit Economics. "The recent pick-up in the Spanish manufacturing sector continued in March, finishing off a solid first quarter," a Markit economist noted in yesterday's report on the Spain Manufacturing Purchasing Managers Index (PMI).

But with unemployment sticking near record levels — nearly 26 percent in February, according to Eurostat — Spain remains vulnerable to setbacks. The best medicine for keeping the growth momentum going is closely bound up with improvement in the labour market. Today’s monthly update on the change in the jobless population will provide fresh guidance for deciding how this critical factor stacks up at the moment. Based on the last two releases, there’s room to wonder what comes next. The number of unemployed persons surged in January and was essentially flat in February. Without a substantial decline in today’s estimate, the sceptics will argue that Spain’s recovery remains is weaker than the PMI data and the Bank of Spain's outlook suggest.


US ADP Employment Report (12:15 GMT) The widely held view that US economic growth will accelerate in the spring faces another test in today’s estimate of private payrolls for March. Economists project that the crowd won’t be disappointed. Employment in the private sector is expected to add 193,000 jobs in March, according to the consensus forecast for this report from ADP. That’s a modest gain, although the prediction represents a substantial improvement over the sluggish 139,000 increase in ADP's February release.

My econometric modelling, however, suggests that today’s number could be softer than expected. That’s also the message in yesterday’s March update of the ISM Manufacturing Index. Although the headline number inched higher and continued to reflect growth in this cyclically sensitive slice of the US economy, the employment component slipped a bit in last month’s reading and reflected a lesser rate of expansion. That’s hardly fatal, although it may be a sign that it’s premature to assume that we’ll see a quick rebound in employment growth.

In any case, today’s ADP number will provide updated guidance on the main event for this week in US economic news: Friday’s payrolls data from the government. Expectations are upbeat here as well, with the consensus forecast calling for a gain in excess of 200,000 for private payrolls.



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