From the important macro-economic news yesterday, investors were closely monitoring the UK construction PMI as a leading indicator of economic health and good news came with the actual reading better than expected, coming at 53.1, while the expectancy was 52.6. The UK construction sector has reached a 7 month high, where the HIS Markit emphasized that house building remained the best performing area of activity and that the input cost inflation enhanced in the previous month. As IHS Markit associate director, Tim Moore stated, the solid contribution from home building assisted in raising the overall construction activity in the previous month, while lack of new work to replace completed civil engineering projects continued to hold back growth. However, the opportunities for industrial and distribution work have helped to offset the slowdown in retail and office development.
From the EU, investors were looking at the retail sales release where the numbers were flat, coming at 0.0%, as opposed to expected 0.1%. The fact that the sales in the euro zone were flat in May, after a small drop in April is seen as a sign of stagnant consumption. As Eurostat has showed, the consumers spent more on food and tobacco and less on footwear and textiles, while the fuel purchase remained constant. With regards to the producer price index, the readings came better than expected, where prices rose 0.8% in May after being flat for two months in a row. The monthly rise is mostly caused by a sharp increase in energy prices and durable goods.
On Tuesday we have also seen the decision of the Reserve Bank of Australia, which has decided to keep its rates at record low for a twenty third consecutive month due to slowness in inflation and wages locally and the global trade risk. According to RBA Governor, it is expected that the unemployment will be reduced and inflation to return to its target, with a gradual progress. RBA Governor, Philip Lowe has also mentioned that the uncertainty of the global outlook comes from the direction of international trade policy in the US and has called a potential trade war ‘the greatest single external threat to Australia’s prosperity’, as 45% of the country’s GDP counts on the two-way trade. According to the analysts and investors, there is an implication of approximately 80% for a rate hike in December 2019.
ECONOMIC CALENDAR EVENTS FOR JULY 4th
AUD Retail Sales m/m
AUD Trade Balance
EUR Final Services PMI
GBP Services PMI