Week Ahead: UK GDP in focus, will labour data help ease recovery doubts?

There’s plenty of growth and labour market data in the docket this week to further improve the picture of the global economy, while sentiment data could provide some clarity on the outlook. The RBNZ will announce its latest policy decisions, and oil markets could see heightened volatility on reports from the International Energy Agency and OPEC.

UK Q2 GDP, smaller decline but longer recovery?

The first estimate of the UK’s Q2 GDP is due on Wednesday. Analysts have forecast a -20.4% drop on the quarter. Last week the Bank of England stated that it believes the Q2 drop will be “less severe” than initially predicted, although the timeframe for the recovery has been extended.

A second reading of Eurozone GDP is also due this week – the economy fell by a record -12.1% between April and June according to preliminary estimates and no changes are expected this time around.

Labour market data key as questions over recovery pace grow

Jobs data remains one of the key metrics used to measure the economic recovery from Covid-19 and the figures are coming under threat from fresh lockdowns in major cities and regions in the world’s largest economies.

The UK’s unemployment rate currently stands at 3.9% but some analysts are expecting the data for June to reveal a jump to 6%. The Bank of England’s latest forecasts predict the jobless rate will hit 7.5% by the end of the year. We’ll get figures for unemployment benefit claims for July as well.

Australia also releases monthly employment change and unemployment rate figures, while the weekly US jobless claims data remains a key focus.

Have fresh lockdowns hit consumer, business sentiment?

Consumer and business sentiment data this week includes Australia’s NAB Business Confidence and Westpac Consumer Confidence, the ZEW Economic Sentiment indexes for the Eurozone and Germany, and the latest US University of Michigan Consumer Sentiment index. Sentiment may have taken a knock from the new restrictions put in place to help control the spread of the virus.

Also of note this week are Chinese and US inflation rates and retail sales.

RBNZ interest rate decision

Recent economic data suggests the Reserve Bank of New Zealand may not need to make any further policy adjustments at this moment, although a rise in hedge funds betting against the Kiwi indicates the smart money is expecting more stimulus in the near future.

Q2 employment data showed a much smaller-than-expected drop in employment and, thanks to an upwards revision to the Q1 data, the jobless rate unexpectedly held steady at 4%.

Business inflation expectations have also risen from 1.2% to 1.4%, meaning the outlook for both areas the RBNZ is mandated to consider has improved.

IEA & OPEC oil market reports

As well as the weekly US EIA crude oil inventories data, commodity traders will also want to watch for the latest oil market reports from the International Energy Agency and OPEC.

Recent oil inventories data from the US has been bullish, showing a huge draw over the past two weeks. Traders will want to see that the IEA and OPEC expect a continued recovery in demand.

Highlights on XRay this Week

Read the full schedule of financial market analysis and training.

Key Events this Week

Watch out for the biggest events on the economic calendar this week: