The week ahead in Europe: Light agenda, UK jobs focal point – Nomura

Both the UK and Europe see a light economic agenda for the week ahead, with the UK labour market report and Euro area industrial production the main focus, notes the Economics Team at Nomura. 

Key Quotes

UK BRC retail sales (Tuesday): The BRC retail sales report is one of a number of monthly surveys and anecdotal evidence about conditions on the High Street. So far this year, annual nominal like-for-like sales growth has averaged just over 0.5% y-o-y, versus a total of just below 1.5%. We expect retail sales growth to remain lacklustre in the coming months as the sterling-induced rise in inflation bites. 

UK labour market report (Wednesday): This is arguably the most important piece of economic news ahead of the BoE’s 3 August MPC meeting. The focus will be firmly on the average wage numbers, where annual rates of growth have been weak. That will remain the case this month given that past monthly declines remain within the annual comparison. What is far more important, therefore, is to monitor the monthly growth rate of private sector ex-bonus (regular) pay, which was 0.2% and 0.4% m-o-m in the past two reports respectively. Another decent number would support our view of the first rate rise in a decade at the August policy meeting.

Euro area industrial production (Wednesday): We expect euro area industrial production to increase 0.3% m-o-m in May following a 0.5% m-o-m increase in April. An outcome in line with our expectations would take the April/May average level of IP 0.7% above the average for Q1, indicating a positive industrial sector contribution to Q2 GDP. 

UK RICS housing market report (Thursday): The numbers to watch in this report are the prices balance (currently 18% and the lowest since last August) and the sales-tostocks ratio (presently 38.5) which is well correlated with lenders’ measures of house price inflation.

BoE Credit Conditions Survey (Thursday): The BoE produces measures of credit availability and demand for the household sector (both secured and unsecured) as well as for corporate lending. Unsecured household lending availability deteriorated last quarter while that of secured expanded; corporate lending availability has been broadly flat over recent quarters.

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