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Economics Weekly - US payrolls to show sharp decline
Economics Weekly 28 June 2010
US payrolls to show sharp decline
This week is considerably quieter in terms of UK economic data. Several housing market releases should get the most market attention, with net mortgage lending and mortgage approvals for May, as well as the Nationwide house price index for June, providing the latest snapshot of the current state of activity. Both lending and approvals have trended sideways over the past few months, and more of the same is expected, with net lending likely to remain around Â£0.5bn and approvals up very marginally to 52k. Also out during the week, the final release of Q1 GDP is expected to confirm the previous 0.3% quarterly growth estimates, while the manufacturing PMI index is expected to fall back a touch to 57.5 but remain at a level consistent with robust growth in the sector. The Bank of England publishes its quarterly Credit Conditions survey on Friday.
We expect US non-farm payrolls to show a sharp 140,000 fall in June as temporary hiring related to 2010 census rolls off. Particular attention will, however, be paid to private payrolls, where we look for a net gain of 95,000, stronger than the 41,000 posted in May but well below levels in March and April. Recent data support the view that companies are more confident about boosting business spending than adding to payrolls. We look for the unemployment rate and average workweek to remain unchanged at 9.7% and 34.2 hours, respectively. The other main highlights this week are ISM manufacturing on Thursday and consumer confidence on Tuesday, with small falls predicted in both indices in June. Fed speakers this week include Warsh and Evans.
This week sees a variety of economic data releases to shed further light on the evolving economic picture within the euro area. The latest European Commission confidence reports, final PMI manufacturing surveys and preliminary CPI data for June are all scheduled for release. We look for the Commission economic sentiment index to be flat at 98.4 in June, as robust export sentiment is broadly offset by fall-out from market concerns over the sovereign debt crisis. M3 money supply figures (which incorporate bank lending to the private sector) will also be closely watched. For M3, we forecast an annual contraction of 0.2% during May. In other events, the expiry of the ECBâ€™s first LTRO on Thursday will bring renewed focus on liquidity and funding issues in the region.
In emerging markets this week, Turkish GDP is expected to have risen strongly in Q1, up 12.9% year-on- year from 6% in Q4, underpinned by robust domestic demand and a recovery in exports. In other news, Poland is expected to keep its base rate steady at 3.5%. Looking at the Asia-Pacific region, South Korean inflation is forecast to rise to 2.9% in June, up from 2.7% in May. While building inflationary pressures are a concern, we expect the Bank of Korea to keep interest rates on hold while they assess the fall-out from the eurozone debt crisis on the economic outlook. Indonesian inflation is also projected to show a higher annual rate at 4.5% in June.
Marchel Alexandrovich, Jeavon Lolay, Mark Miller and Sian Fenner
Economic Research,10 Gresham Street,
Lloyds TSB Corporate
London EC2V 7AE,
0207 626 - 1500
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