Daily Market Digest: US ADP payrolls steady, no change to Eurozone inflation

Aug 31, 3:45 pm
Payrolls

Market Summary

  • Japan housing starts rise 0.80% in July
  • Japan industrial production see flat in July after rising 2.30% in June
  • Germany retail sales rises 1.70%, beating estimates
  • French inflation seen weaker, rising 0.30% in August
  • Eurozone preliminary inflation at 0.20% in August; Core CPI rises 0.80%
  • ADP private payrolls show 177k jobs being added in the private sector
  • Canada Q2 GDP contracts 1.60%

Today’s Economic events

  • Japan preliminary industrial production m/m 0.0% vs. 0.70%
  • New Zealand ANZ Business Confidence 15.5 vs. 16.0 previously
  • Australia private sector credit m/m 0.40% vs. 0.40%
  • Japan housing starts y/y 8.90% vs. 7.60%
  • Germany retail sales m/m 1.70% vs. 0.50%
  • UK, Nationwide HPI m/m 0.60% vs. -0.10%
  • French consumer spending m/m -0.20% vs. 0.30%
  • French preliminary CPI m/m 0.30% vs. 0.40%
  • Eurozone CPI y/y flash estimate 0.20% vs. 0.30%; Core CPI y/y flash estimate 0.80% vs. 0.90%
  • Eurozone unemployment rate 10.10% vs. 10.0%
  • ADP payrolls, 177k vs. 175k
  • Canada GDP m/m 0.60% vs. 0.50%; GDP y/y 1.10% vs. 1.10%

Coming Up

  • (USD) Pending home sales
  • (Crude Oil) crude oil inventories
  • (NZD) Overseas trade index

Japan housing starts rebounds, industrial production flat in July

Housing starts in Japan expanded 0.80% in July, rebounding from the 2.50% decline in June, data from the Cabinet ministry showed on Wednesday.

Japan Industrial Production, July 2016: 0.0% (Prev.: 2.30%)
Japan Industrial Production, July 2016: 0.0% (Prev.: 2.30%)

While construction orders recorded double-digit contraction, housing starts managed to come out slightly better. The pace of growth in July was the fastest, as the data beat estimates of 7.30%. The number of annualized housing starts improved to 1.005 million compared to 1.004 million in June. Construction orders fell 10.90% on a year over year basis in June, based on data from 50 big contractors and extending the declines of 2.40% in June, marking the second month of fall in orders.

Japan’s industrial production data was also released today showing output was flat in July, missing forecasts of a 0.70% increase. In June, industrial production increased 2.30%. On a year over year basis, industrial production in Japan is down 3.80% missing forecasts of a 3.0% decline after output was seen at -1.50% in June. The increase in transportation equipment, electronic parts and machinery were offset by a decrease in chemicals, fabricated metals, and other business machinery. Shipments grew 0.90% on the month but are down 3.80% on the year.

Eurozone flash inflation rises 0.20% in August

Initial reports for consumer prices for August surprised to the downside today indicating that there was no sign of an increase in inflationary pressures in the euro area. The data from Eurostat showed that headline inflation in the Euro zone was 0.20%, rising at the same pace as in July. The core CPI, however, rose 0.80%, slower than July’s increase of 0.90%.

Euro area flash inflation estimates, August 2016: 0.20% (July: 0.20%)
Euro area flash inflation estimates, August 2016: 0.20% (July: 0.20%)

The Eurozone CPI data follows muted inflation estimates from Germany and France. Overall, eurozone inflation continues to remain at the lower range. Energy prices fell 5.70% in August, while food, alcohol and tobacco prices advanced 1.30%. Services increased 1.10% while non-energy industrial goods increased 0.30% during the month.

Stephen Brown, the European economist at Capital Economics, said that the weak inflation data boosts the case for further action from the ECB. “The unchanged headline inflation rate in August highlights the fact that price pressures in the eurozone remain weak and boosts the case for more monetary easing from the ECB,” Brown said.

The inflation rate in the euro area remains stubbornly below the 2% target rate and has failed to rise anywhere closer. The ECB continues to buy 80 billion euros in assets to pump money into the economy while interest rates have remained at or below zero percent. The ECB will be meeting next week for its monetary policy meeting.

ADP Payrolls: Private sector employment increases by 177k

Private sector hiring in the US saw 177k jobs being added in August, data from payrolls processor ADP and Moody’s showed on Wednesday. The headline print was higher than forecasts of 175k. The payrolls number for July was revised higher from 179k to show 194k.

ADP Payrolls, August 2016: 177k (Prev.: 194k)
ADP Payrolls, August 2016: 177k (Prev.: 194k)

Hiring activity increased in small businesses who added 63k jobs while mid-sized businesses added 44k jobs during the month. On a sector-wise breakdown services continued to outperform, adding 183k jobs while goods-producing sector shed 6k jobs. Most of the declines came from the construction which lost 2000 jobs. On the services side, trade, transportation, and utilities added 26k while financial activities sector added 15k jobs. However, the biggest gains came from professional and business activity sector which added 53k jobs during August.

Ahu Yildirmaz, vice president and head of the ADP Research Institute said, “Job growth in August was stable and consistent with levels from previous months as consumer conditions improve.” While Mark Zandi from Moody’s added, “The American job machine continues to hum along. Job creation remains strong, with most industries and companies of all sizes adding solidly to their payrolls. The U.S. economy will soon be at full employment.”

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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