The week ahead Euro area - Nomura

Analyst's European outlook for the week ahead ...

Key Quotes:

"July flash PMIs, German inflation and UK GDP data are in focus this week. 

Euro area July flash PMIs (Monday): We expect the euro area composite PMI to increase to 56.7 in July from June’s 56.3. At the sector level, we expect the regional manufacturing PMI to rise to 57.9 from 57.4. We forecast the services PMI to increase to 55.7 from 55.4. These readings would indicate that the likely strong momentum for euro area GDP growth in Q2 – we are expecting a quarterly gain of 0.7% – has carried over to the early weeks of Q3. 

German Ifo (Tuesday): We expect the German Ifo business climate index to increase to 115.5 in July from 115.1 in June. We forecast the current situation and expectations indices to pick up to 107.1 (from 106.8) and 124.5 (from 124.1) respectively. 

UK CBI industrial trends survey (Tues): The business optimism balance fell to almost zero in Q2 – the focus will be on whether it can remain above water in this Q3 survey. Other balances of particular interest relate to new orders, output and employment, capex over the coming 12 months (how it responds to Brexit concerns), capacity and whether the availability of labour is limiting activity. UK GDP, first estimate Q2 (Weds): Economic growth slowed to just 0.2% q-o-q in Q1, but the PMI surveys suggest that Q2 should be around the 0.5% mark. With industrial production having been weak and construction growth falling (at least according to the official data), we think economic growth is likely to be a little weaker than what the surveys are pointing to, and forecast a 0.4% q-o-q rise in the initial print for Q2.

UK CBI distributive trades survey (Thurs): The slowdown in retail sales is the story of the moment, resulting largely from sterling’s past fall and the consequent rise in inflation. The CBI’s survey measures sales volumes vs a year ago, the balance having been in positive territory for the past five months now. The question is whether it will remain there. A weaker inflation print in June may be helpful in this respect. 

Germany, preliminary July inflation (Friday): We expect the flash reading of German HICP inflation to decline to 1.4% y-o-y in July from 1.5% y-o-y in June partly due to a decrease in clothing prices and the unwinding of seasonal distortions in package holiday prices."

USA events: Fed and GDP eyed- Nomura