August 25, 2013 6:10 pm

US faces mixed outlook in latest economic data releases

Key US indicators are set to present two very different pictures of the state of the economy this week.

The second release of second-quarter GDP data on Thursday is expected to see a very substantial upward revision. But on the other hand, consumer sentiment appears to be faltering as concerns about the debt ceiling grow once more, and an autumn confrontation in Congress becomes likely. This week’s Conference Board data tomorrow may reflect that.

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“The latest readings from the University of Michigan and Gallup surveys suggest that consumer sentiment may have weakened recently – perhaps in part due to higher interest rates and volatility in financial markets,” says John Zhu of HSBC.

Other US indicators this week include house prices, pending home sales and durable goods orders.

Bank of England governor Mark Carney will have a second shot at communicating his new forward guidance policy on Wednesday, in his first public speech since the August inflation report. Markets were unconvinced by Mr Carney’s projections in the report earlier this month, particularly for the unemployment rate, which is key to any future wind-down of the BoE’s quantitative easing programme.

“The new governor may have been surprised by the rise in gilt yields and sterling which followed the announcement of the new forward guidance monetary policy framework,” says Mr Zhu. “We think Mr Carney will try to talk market expectations back to something closer to the BoE’s own assumptions.”

Figures on net consumer credit and mortgage approvals are out on Friday and are likely to provide the latest evidence of the booming housing market. “There is considerable momentum in the UK housing market, driven by low mortgage rates, higher consumer confidence and government incentives,” says Mr Zhu. However, this may be sucking credit away from businesses, raising fears that a housing-driven economic recovery will not prove sustainable in the longer run.

In Asia, Korea, Singapore and Thailand will release industrial production figures which should give an insight into what to expect from their third-quarter growth. With China’s economy picking up again, positive figures might be expected.

Indian second-quarter growth is expected to be flat, and may add to the country’s recent currency woes.

In Japan, Friday’s inflation data will show whether Abenomics is reinflating the economy. Last month it posted its first annual gain in a year, so further improvement may be in the pipeline. Retail sales and industrial production figures will add to the picture.

Positive news is also expected in Europe, with the latest consumer confidence figures expected to show further improvement despite the record-high unemployment rate, in which no change is expected this week. “Inflation remains low, reducing the squeeze on households’ income, whilst unemployment appears to have stabilised,” Mr Zhu says.

Germany, in particular, is doing well, and this week’s Ifo survey and the unemployment rate are likely to further confirm it. “The data should confirm the solidity of Germany’s current growth model: good domestic demand supported by a strong labour market sweetened by a gradual pick-up in industrial activity,” says James Knightley of ING.

Poland is also doing well: a positive outcome is expected for this week’s second- quarter GDP and retail sales figures.

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