Week Ahead: Economic Indicators (US)
Hey, Traders!
For the June 3rd week, here is a list of all of the major economic indicators being released during the US Session, with a brief synopsis of what they represent and what to possibly expect from the markets in reaction.
Monday 3rd June
09:45 ET
US S&P Manufacturing PMI May Final
The US S&P Manufacturing & Services Purchasing Managers’ Indices are composite economic indicators derived from surveys of purchasing managers in the manufacturing and services sectors. It measures the prevailing direction of economic trends in the manufacturing sector by assessing factors such as new orders, production, employment, supplier deliveries, and inventories.
A PMI reading above 50 indicates expansion in economic activity, while a reading below 50 suggests contraction.
It provides insight into the health and direction of the US economy, helping analysts and policymakers make informed decisions.
What to Expect
If it come in higher than expected, generally, this could mean there is more demand for goods and services.
This could lead to higher consumer spending, which could be an upside risk to inflation and feed the ‘higher for longer’ rate narrative.
If realized, the dollar could see some strength, while US stocks could see some weakness.
If it comes in cooler than expected, the opposite could be expected.
10:00 ET
US ISM Manufacturing PMI for May
The ISM Manufacturing PMI, measures the health of the manufacturing sector.
Similar to other PMI indicators, a reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 suggests contraction. The PMI is based on five major survey areas — each of which is weighted equally: New orders, Inventory levels, Production, Supplier deliveries, Employment.
What to Expect
The ISM manufacturing PMI has been in contraction for 16 consecutive straight months and from it’s last data release a further decline didn’t spark any recess fears, however markets took it as a positive indication that the Fed won’t have to hold rates for longer. If the PMI were to follow the same trend and decline again markets may view the data in the exact same way.
Tuesday 4th June
10:00 ET
US JOLTS Job Openings for April
The US Job Openings and Labor Turnover Survey (JOLTS) provides monthly data on job openings, hires, separations, and other labor market dynamics in the United States.
It offers insights into the demand for labor and the overall health of the job market. Job openings represent unfilled positions that are actively being recruited for by employers. Analyzing JOLTS data helps assess trends in job creation, labor market tightness, and worker mobility, providing valuable information for understanding the dynamics of the US labor market.The JOLTS data is the oldest bit of employment data this week, representing the month of February, while ADP and Nonfarm Payrolls reports represent the month of March.
Having said that, with employment a key piece of the Fed’s monetary policy puzzle, markets will still monitor this.
What to Expect
If JOLTS comes in higher than expected, that indicates there are a larger number of job openings, which means that there is demand on the corporate side to hire more staff.
This can be seen as an upside inflation risk, and a threat to the Fed’s 2% inflation target, as higher demand for staff indicates corporations are not being affected as the Fed would like by tight monetary policy.
This could cause strength in the dollar and weakness in US stocks.
US Factory Orders April Final
The US Factory Orders Preliminary Report provides early estimates of orders for long-lasting manufactured goods, such as machinery, appliances, and transportation equipment.
This data is an indicator of business investment and consumer confidence, as durable goods purchases typically require a significant capital outlay and reflect long-term economic expectations.
Higher-than-expected orders suggest potential economic growth and increased business activity, while lower-than-expected orders may indicate a slowdown in manufacturing and overall economic activity.
What to Expect
If factory orders goods come in higher than expected, this could also mean consumers are spending more, possibly leading to an upside risk for inflation.
This could mean strength in the dollar and weakness in US stocks.
If it comes in cooler than expected, the opposite could be expected.
Wednesday 5th June
08:15 ET
US ADP Employment Change
The ADP Employment Change compiled by the ADP Research Institute utilizes actual payroll data from a diverse array of private-sector employers to gauge changes in employment levels.
Excluding government and farm employment, the ADP figures provide insights into the dynamics of the private labor market, covering small, medium, and large businesses.
What to Expect
While the Fed does wish to uphold its dual mandate of 2% inflation with maximum job growth, an overly hot reading may have negative implications for the future of inflation. This could send the dollar up and stocks down.
09:45 ET
US S&P Services PMI May Final
The US S&P Services PMI measures the activity of purchasing managers in the services sector.
Based on a monthly survey, it indicates sector health with a value above 50 signaling expansion and below 50 indicating contraction.
This index is key for gauging economic growth and business conditions in services.
What to Expect
FOMC officials have noted that the service sector is currently an upside inflation risk.
Following the hotter-than-expected prelim Services PMI that was released a couple of weeks ago, US stocks would want to see a lower-than-expected services PMI in this report to regain confidence that the service sector is not going to act as an upside risk to inflation.
If a lower-than-expected services PMI was realized, stocks could see a move to the upside, as it could push forward bets on Fed interest rate cuts.
BoC Rate Decision
The Bank of Canada Rate Decision is a periodic announcement about the target for the overnight interest rate, a key tool for controlling inflation and stabilizing the economy.
Announced eight times a year, the decision is based on economic indicators like inflation, employment, and GDP growth.
This rate influences loan and mortgage interest rates, the Canadian dollar’s exchange rate, and overall economic activity.
What to Expect
Median estimates expect the Bank of Canada to cut interest rates from 5% to 4.75%
If realized, this would make them the first of the developed economies to reduce their historically high interest rates.
As this cut is priced in by the markets, it would be unlikely to cause much weakness in CAD or much strength in Canadian stocks, attention instead will turn to the rate statement, for any clues on the future of policy.
10:00 ET
US ISM Services PMI for May
The US ISM Services Purchasing Managers’ Index is a monthly economic indicator published by the Institute for Supply Management. It measures the activity level of purchasing managers in the services sector, covering industries like finance, insurance, real estate, and business services.
The index is based on surveys that assess business activity, new orders, employment, and supplier deliveries.
A reading above 50 indicates expansion in the services sector, while a reading below 50 indicates contraction.
This index is widely watched as it provides insights into the overall economic health and growth of the services sector.
Key Differences between ISM & S&P services PMIs
Methodology: ISM focuses on larger firms, while S&P includes a broader mix of company sizes.
Survey Scope: ISM surveys supply executives, whereas S&P surveys a wider range of business activities within services.
Source and Compilers: Different organizations compile and interpret the data, leading to variations in the final index values and interpretations.
These differences mean the two PMIs can sometimes provide slightly different signals about the health of the services sector.
What to Expect
FOMC officials have noted that the service sector is currently an upside inflation risk.
Following the hotter-than-expected prelim Services PMI that was released a couple of weeks ago, US stocks would want to see a lower-than-expected services PMI in this report to regain confidence that the service sector is not going to act as an upside risk to inflation.
If a lower-than-expected services PMI was realized, stocks could see a move to the upside, as it could push forward bets on Fed interest rate cuts.
10:30 ET
US Weekly EIA Crude Oil Inventories
The US Weekly EIA Crude Oil Inventories report, released by the Energy Information Administration every Wednesday, provides data on the current amount of crude oil held in storage.
This report helps gauge supply and demand dynamics in the oil market, influencing oil prices and market sentiment.
What to Expect
If the report shows a larger-than-expected reduction in Crude inventories, then that could show that there is higher demand than expected for oil, which could cause strength in US oil prices.
The converse is also true, if there is more oil than expected left in inventories, then that could show that there is less demand than anticipated, which could cause weakness in US oil prices.
Thursday 6th June
08:30 ET
US Weekly Initial & Continued Jobless Claims
US Weekly Initial Jobless Claims measures the number of people filing for unemployment benefits for the first time, indicating new layoffs.
Continued Jobless Claims track those still receiving benefits, showing ongoing unemployment.
Both are released weekly by the Department of Labor and help gauge labor market health.
What to Expect
A higher-than-expected jobless claims number would indicate a higher unemployment rate, which would be in line with increased downside inflation risk.
Though this report does not carry as much weight as any of the 3 monthly employment reports that are coming out this week, a higher unemployment rate would be likely to push forward bets on Fed rate cuts, if the deviation was large enough, which could cause strength in US stocks and weakness in the dollar.
US Trade Balance for April
The US Trade Balance is reported monthly by the Census Bureau and the Bureau of Economic Analysis.
It is an economic indicator that measures the difference between the value of the country’s exports and imports of goods and services. It can be either a surplus or a deficit.
A Trade Surplus occurs when the value of exports exceeds the value of imports.
A Trade Deficit occurs when the value of imports exceeds the value of exports.
The trade balance is a component of a country’s current account, which includes not just trade in goods and services, but also international income and transfers.
A trade deficit indicates that the country is buying more from the rest of the world than it is selling, which can affect currency value, economic policies, and international relations.
Conversely, a trade surplus indicates that the country is selling more to the rest of the world than it is buying.
What to Expect
This release is unlikely to move the markets alone, without a large deviation from expectations, it is likely to be overshadowed by the weekly jobless claims number, which is released at the same time.
As an importer, the US has been in deficit since 1975.
However, a larger-than-expected deficit could indicate weakness in the future for US GDP.
Friday 7th June
08:30 ET
US Employment Situation for March
US Nonfarm Payrolls
US Nonfarm Payrolls, commonly referred to as NFP, is a key economic indicator published by the Bureau of Labor Statistics on a monthly basis.
It represents the total number of paid workers in the US, excluding farm employees, government workers, and non-profit organization employees.
The NFP report provides insights into the overall health of the labor market, reflecting changes in employment levels.
The data is closely watched by policymakers, economists, and investors for its impact on financial markets and economic policy decisions.
US Unemployment Rate
The US Unemployment Rate is a widely tracked economic indicator that measures the percentage of the labor force that is unemployed and actively seeking employment.
It is calculated by dividing the number of unemployed individuals by the total labor force.
The Unemployment Rate can differ from the Nonfarm Payrolls data due to differences in their definitions and methods of measurement.
While NFP represents the total number of paid workers in the US, excluding certain categories like farm and government employees, the Unemployment Rate considers the percentage of the labor force that is actively seeking but unable to find employment.
US Average Earnings YoY
US Average Earnings Year-over-Year is an economic indicator that measures the annual percentage change in the average earnings of all non-farm employees in the United States.
This data is typically derived from the monthly employment reports released by the US Bureau of Labor Statistics.
Average earnings include wages and salaries, and the YoY comparison helps assess the rate of change in workers’ compensation over a one-year period.
Positive growth in Average Earnings YoY is indicative of increasing income levels, while negative growth suggests a decline in average earnings. Policymakers, economists, and investors monitor this indicator for insights into wage trends and their implications for consumer spending and inflation.
What to Expect
The US non-farm payrolls is the most highly monitored employment indicator by both traders and policymakers.
A higher-than-expected reading suggests that employment is not slowing, posing an upside risk to inflation.
This may lead the Federal Reserve to maintain interest rates higher for longer, as the FOMC have mentioned that a higher unemployment rate (around 4% according to some officials) is necessary to see inflation fall to the 2% target.
This repricing of US monetary policy may cause weakness in US stocks while strengthening the dollar.
The inverse could also be true, if Nonfarm Payrolls comes in lower-than-expected, this could cause markets to push forward bets on Federal Reserve rate cuts, which could cause strength in US stocks and weakness in the dollar.
Having said that, market participants will also look at average earnings statistics to see if rising salaries could pose the risk of a future wage-price spiral.
