3 Numbers To Watch: UK Retail, UK CBI Ind. Trends, US Home Sales
Britain’s economy is in focus today via crucial updates on retail sales and the CBI Industrial Trends Survey. Later, investors turn to the April release on existing home sales in the US for a revised look at how the housing recovery is holding up. Meanwhile, keep an ear open today on the scheduled chattering from central bankers. Swiss National Bank Chairman Thomas Jordan is scheduled to speak at 10:00 GMT, followed by Federal Reserve Chairman Ben Bernanke's testimony in Congress at 14:00 GMT and Dallas Fed President Richard Fisher's speech at 17:00 GMT.
UK Retail Sales (08:30 GMT) Is the British economy on a sustainable growth track? Recent data suggests a cautious “yes” is plausible if not yet confirmed. That is an improvement from earlier in the year, when another recession looked like a high-probability event. But the numbers are looking more encouraging these days, at least to the extent that recession risk is now considered low. But can we expect a bit more than skirting another downturn? Today’s retail sales update for April will offer a clue.
Recent history for this series does not look all that inspiring. Consumer spending slipped 0.5 percent in March and the year-over-year change dipped slightly into the red after posting a strong 2.6 percent annual rise in February. Some analysts blame the cold weather and an early Easter for the headwinds in March. In that case, April’s numbers should perk up, assuming the UK economy is genuinely recovering in something that resembles more than merely escaping the death spiral of recession. For the moment, it is still tough to tell the difference, although the number du jour may dispense with the haze.
UK CBI Industrial Trends Survey (10:00) Executives in the manufacturing sector are not helping the case for optimism. If Britain’s economy is truly on the mend, as some reports suggest, you would not know it by looking at the mood in the industrial sector. This sentiment index dropped sharply in the April update, raising fears that any optimism on the economic outlook for the UK is still premature. The reasoning here is that a durable recovery must include manufacturing.
The good news is that analysts expect some improvement in today’s update, at least enough improvement to keep hope alive. The consensus forecast sees the CBI rising modestly to -17. That still equates with expectations that order volumes will continue to shrink, albeit at a lesser rate. Anything less than a modest improvement, however, would cast dark clouds over this struggling sector, which would fuel fresh worries about the broad macro trend in Britain.
US Existing Home Sales (14:00 GMT) The housing recovery is real, say analysts who were impressed with yesterday's better-than-expected earnings report from Home Depot, a bellwether retailer that is also the world's biggest home improvement chain. The assumed logic is that if consumers are spending more on their homes, that is an encouraging sign for the housing industry generally. Perhaps, although last week's hefty slump in new residential construction in April reminds that the recovery in this critical pillar for the economy can and will be bumpy at times.
Yet analysts are expecting a smoother ride in today’s update. The consensus forecast sees existing home sales rising to the psychologically upbeat 5-million mark for units in April (on a seasonally adjusted annualised basis) for the first time in over three years. Actually, last month’s gain in newly issued building permits for residential construction suggests that better days are still to come for housing, despite the wobbly data in starts for April. In that case, today's release on existing sales should bring a fresh round of support for thinking positively.