Last Week’s Highlights
UK Manufacturing Sector Stabilizes in June
The latest manufacturing data from the United Kingdom for the month of June created some optimism. After a disastrous drop in the early months of this year, manufacturing is showing some stabilization.
Data from IHS Markit saw the UK’s Purchasing Manager’s Index rising from 40.7 in May to 50.1. A reading above 50 indicates expansion in the sector.
The rebound came as UK factories re-started operating after the lockdown due to the global pandemic.
Fed Minutes Reveal Discussions on Yield Curve Control
The US Federal Reserve bank released the meeting minutes from the June monetary policy meeting. As interest rates remain near zero, the minutes saw policymakers discussing the various tools available for monetary policy.
The minutes showed that policymakers were discussing the idea of yield curve control, something similar to what the Bank of Japan does currently.
Members also indicated support for outcome-based forward guidance, with some in favor of the forward guidance being anchored to the inflation data.
Retail Sales in Australia Rebound in May
The latest economic reports from Australia indicate that perhaps the worst is over. The retail sales data form the Australian Bureau of Statistics showed that retail sales grew 16.9% in May on a month over month basis.
This follows a 17.7% decline just the month before. Food retail grew 7.2% while personal accessories grew 129%. Restaurant and take away services accounted for about a 30% increase on the month.
US Labor Market Recovers for a 2nd Consecutive Month
The latest figures from the Labor Department showed another solid month in the jobs market. Payrolls grew 4.8 million in June following up on a 2.7 revised increase in May.
Economists were forecasting an increase of just 3 million during the month. The labor department noted that despite the second month of increase, it is still far off from the 22.2 million jobs that were lost in the months of March and April.
The US unemployment rate eased from 13.3% in May to 11.1% in June. Meanwhile, the average hourly earnings grew by 1.2% on the year in June.
Upcoming Economic Events
ISM Non-Manufacturing PMI to Recover in June
The Institute of Supply Management will be releasing the non-manufacturing data for June. According to the preliminary estimates, non-manufacturing or services activity is forecast to rise from 41.9 in May to 44 in June.
While this indicates a modest recovery, the fact that non-manufacturing activity is still below 50 suggests contraction. However, the estimates might be conservative. This comes following last week’s manufacturing PMI report which saw a rebound in the index from 43. in May to 52.6 in June.
Reserve Bank of Australia to Stay on the Sidelines
The RBA will be kicking off a new month with its monetary policy meeting. According to the general estimates, the RBA will not be making any changes to interest rates.
The RBA cut rates in March this year responding to the pandemic crisis. While the Australian economy has also been hit, there is evidence building up that the economic recovery is underway. This could mean that the RBA will remain on the sidelines but maintain a dovish outlook to support the markets.
Germany Factory Orders to Rebound in May
The latest figures from Germany will likely show an improvement in the factory orders. After falling nearly 36% in April, the data for May suggests a more modest decline of just 28%.
With the ECB and the European Commission injecting stimulus into the markets, there is evidence of recovery already. This could potentially mean that investors will shrug off the data. Later in the week, Germany will also be releasing data on industrial production for May.
China’s Inflation Set to Improve in June
The latest inflation figures from China will likely show that consumer prices are rising steadily. Forecasts show that headline inflation will rise from 2.4% in May to 2.7% in June on a year over year basis.
Meanwhile, the producer price index is forecast to see a modest improvement from a 3.7% decline previously to a 3.3% decline in June. Consumer prices in China hit a high of 5.4% in January before easing steadily since then.