> The most important data this week will be the industrial production indices in Europe. Germany and Spain (8) and France, Italy and UK (10). Their momentum will reflect and highlight the risk of recession in Europe as corporate surveys are weak throughout Europe.. Germany has been weak recently and corporate surveys during summer and in September have validated the possibility of a deep recession in Germany. In Italy, the dynamics remains low and risks are on the downside In Spain, the momentum is lower since the end of spring. This has forced the Bank of Spain to revised down its forecasts for 2020 and 2021. The industrial figure will show if the downside risk has to be seen as soon as 2019 In the UK, the uncertainty associated with the Brexit leads to lower growth in the industrial sector. In France, the momentum is still robust
> In Japan, households’ spending in August (8) will be interesting as a VAT rate hike is expected in October. We remember that after the previous VAT rate hike in April 2014, the impact has been very important and persistent on households’ behavior. It has been depressing at this time. Can we forecast the same dynamics ?
> Jolts survey (9) in the US will probably confirm the change in the labor market trend in the US. That’s already how it is perceived by households.
> Inflation rate in the US with the CPI (10) which has an upside bias when compared to the favored Fed’s measure (PCE). The core inflation rate was at 2.4% in August which is high.
> The ECB meeting will be the most important event of the week. Bazooka measures are expected with lower deposit rate (associated with a tiering depending on the size of the bank) and the resumption of the Quantitative Easing Program. > The lower deposit rate with tiering will help the banking system. The EONIA may even be higher than what is currently seen. The QE program will push down all interest rates and reinforce financial repression We do not expect strong impact on the Eurozone growth momentum or on its inflation.
> External trade in Germany will highlight the impact of the world trade lower momentum. Lower exports have pushed the German GDP change in negative territory during the second quarter. An extended slowdown of the world trade (as expected when we look at the worldwide lower exports orders in the Markit survey) would push Germany in recession.
> Retail sales in the US for August (13) are the last good numbers expected. In September, tariffs on Chinese consumer goods imported in the US will have a negative impact on consumers’ behavior. > JOLTS (10) will show the probable change in the US labor market trend > The UK economy had a negative change figure in the second quarter. This will have an impact of the labor market (10) for July.
T he US job market has really changed pace in the past six months. It stabilizes but the trend is not on the downside yet. It will be for the second half of the year. Households have the perception that the trend is no longer improving and the number of available jobs no longer increases. As growth slows, the job market will inevitably change pace. It will be interesting just a few months before the presidential elections
I follow this graphic step by step. The change in trend on the Jolts’ survey reflects that found in the Conference Board survey. The job market may be changing in the United States. You must have that in mind.
The labor market indicator in the Conference Board household survey changed trend in March. It is always easy to find a job but the indicator is now on the downside. Given the strong link with JOLTS labor market indicator, one may wonder about a possible reversal of the US labor market. This is a signal that seems relevant to me (see here for longer data and more in-depth analysis).