Ole Hansen
Ole Hansen, Saxo bank's Head of Commodity Strategy, analyses the opportunities available as the vicious circle of low commodity prices and and EM weakness looks like it's being broken.
Article / 29 May 2013 at 4:45 GMT

3 Numbers To Watch: DE Unemploy., UK CBI Dist. Trades, DE CPI

editor/analyst /
United States

There is a fair amount of economic news on tap for Wednesday, including new money supply data from the European Central Bank and a scheduled announcement from the Bank of Canada. The markets will also be eager to see today’s updates on unemployment and consumer price inflation for Germany, along with the UK CBI Distributive Trades Survey, which offers a clue for anticipating the next retail sales report for Britain.

Germany Unemployment (07:55 GMT) The number of jobless workers rose for the second month in April, the first back-to-back increases since last year’s run of six straight months of gains in the unemployed population. But the last two increases are mild by comparison. Analysts also blame the extended run of cold weather for the expansion in the unemployed, which implies more favourable numbers now that spring has sprung. Assuming, of course, that Germany’s economy is stabilising after a run of turbulence in recent months. Alas, the odds for a better stretch of macro numbers are still debatable. Several indicators remain wobbly in recent updates, including declines in retail sales and flat to slightly lower private sector output.

If Germany has been walking a razor’s edge lately on several fronts, it is not yet clear if the recent rough patch is a sign of deeper troubles in the months ahead. Today’s labour market report for May may offer clarity, for good or ill. As usual, pay close attention to the monthly net change in the number of jobless people. Some analysts think we will see this remain positive for a third month, but only marginally so. Whatever news the update brings, it is sure to set the tone today for trading tied to the Eurozone.


UK CBI Distributive Trades Survey (10:00 GMT) Several economic reports in recent months suggest that Britain’s economy will continue to expand. One exception is weak retail sales data. Consumer spending on a volume basis has declined in each of the past two months. The Office for National Statistics (ONS) blamed the April drop in consumption on the weather. Will the May update deliver a third straight month of lesser spending? Today’s release of the CBI Distributive Trades Survey will provide a clue for anticipating what comes next.

This survey-based leading indicator of retail activity has been trending lower in each of the past five monthly updates, dipping just slightly into negative territory for the first time since last August. In other words, the number of retailers reporting a decrease in sales exceeded those reporting an increase. If today’s number dips further into the red, expectations will suffer for the next retail sales update, scheduled for June 20.  But the market is looking for something better: the consensus forecast calls for a firmer number in today’s release: +6. In that case, the optimists will have reason to cheer when looking ahead to the May retail sales data.


Germany Consumer Price Inflation (12:00 GMT) The disinflation train that has prevailed in the previous four updates on consumer prices is expected to reverse course in today’s report. The consensus forecast sees 1.4 percent annual inflation rate for May, up a bit from 1.2 percent in April. If that projection holds, the markets will like what they see. Stable inflation at this stage is a positive for Europe’s largest economy.

But with economic contraction all around it, Germany remains at risk. As a result, if today’s CPI number unexpectedly falls again, it is going to be hard to shake the worry that the macro defenses are slipping for the one economy that the Eurozone cannot afford to lose to the dark side. But a downside surprise would also raise the pressure for another rate cut from the European Central Bank at its monetary policy announcement scheduled for next week (June 6).

The more likely scenario is that CPI falls in line with expectations and inches higher. But even then the case for more monetary easing remains persuasive, thanks to the toxic mix of high debt and weak/falling demand that burdens so much of the Continent’s economy. Yesterday’s drop in consumer confidence among households in France - near a five-year low - is yet another indication that Europe’s recession rolls on. Today’s inflation report will be closely watched for signs of whether the broad contraction is mounting a new attack on Germany’s economy.



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