ECONOMIC WEEK HEAD

IT IS a busy week for the markets crammed with the usual start-of-the month economic data releases. The most eagerly awaited of these will be from the US. Manufacturing data out on Wednesday and Friday’s US non-farm payrolls figures are crucial pieces of the jig saw of US growth. Fears about the economy stepped up a gear on Friday after news that growth was revised down to a meagre 1.6 per cent in the second quarter.

Weak growth is likely to weigh on the labour market. The consensus is for US job losses of 110,000 in August after a fall of 131,000 in July. This is expected to increase upward pressure on the unemployment rate. The market expects the percentage of the workforce without a job to have risen to 9.6 per cent, up from 9.5 per cent in July, although some, including Dutch bank ING, expect the unemployment rate to rise to 9.7 per cent.

Combined with low expectations for the manufacturing sector, the concern is that economic growth will slow even further in the US in the second half of the year.

In Europe, the most important event will be the European Central Bank (ECB) meeting. Rates are expected to remain unchanged for the foreseeable future and the only thing of note to watch out for will be a further delay in the ECB’s timetable to reduce its support for the financial system.

Watch out for housing data in the UK. The market expects the Nationwide house price survey, released on Wednesday morning, to show that prices contracted by 0.3 per cent in August, a slight improvement on the 0.5 per cent fall in July.

The highlight in the Japanese calender is the financial statement for the second quarter. The concern is that if business investment spending is revised down, it could have pushed second quarter GDP into negative territory. A fear of a return to recession will likely weigh further on Japanese markets.