Unexpected increases in US data releases – weekly update 10 September

Unexpected increases in US data releases – weekly update 10 September

Ben Seager-Scott
Published: 10 Sept 2018 Updated: 13 Jun 2022

A look back over macroeconomic and market events for the week ending 7 September 2018. There were strong wages numbers from the latest US non-farm payrolls report, whilst the PMI numbers began sending contradictory signals. It’s a busy week ahead, with monetary policy meetings at the Bank of England and European Central Bank as well as industrial production figures for a number of countries and US CPI inflation due out.

Non-farm payrolls break a seven-year streak

US non-farm payrolls broke a seven-year streak of initial misses, but it was the wage figure that garnered the most attention. 201,000 jobs were added in August, beating forecasts for 190,000 and a short history of first estimates falling short in August, only to be subsequently revised higher, however the strength in this number was somewhat offset by the cumulative 50,000 downward revision to previous readings.

Of greater note was the Average Hourly Earnings number, which was boosted from 2.7% to 2.9% year on year (yoy). This was the fastest rate since the global financial crisis, and surprised the markets which were expecting no change. This could potentially reignite speculation over wage-push inflation, given that a surprise in this notoriously fickle data series triggered the volatility shock at the start of the year.

Also in the report, unemployment was unchanged at 3.9% (a fall to 3.8% was expected), whilst the Labour Force Participation Rate fell from 62.9% to 62.7%; underemployment fell by 0.1% to 7.4%.

Unexpected surge in US PMIs

There was an unexpected surge in US Purchasing Manager Index (PMI) numbers from the Institute for Supply Management (ISM), which reported Manufacturing PMI jumping from 58.1 to 61.3. This was the strongest reading since 2004 and was not only significantly ahead of the fall to 57.6 that was the median estimate, but was also outside the range of any of the economists’ forecasts (a range of 55.0 to 59.5).

This was particularly surprising given the equivalent report from Markit which showed a cooling of the Manufacturing PMI from 55.3 to 54.7. In the details, New Orders and the Orders Backlog figures were particularly strong. Non-Manufacturing PMI from the ISM also accelerated, from 55.7 to 58.5, ahead of the 56.8 expected. These readings have limited use in isolation, but if sustained would be another sign that the US is becoming increasingly capacity-constrained.

This positive theme did not hold for the UK, where Manufacturing PMI slipped from 53.8 to 52.8, disappointing forecasts for 53.9, although Services PMI did better than expected, rising from 53.5 to 54.3 (53.9 was expected). These data support the notion that global economic growth is now much patchier than it has been for the past few years, which is likely to be reflected in investment returns.

Last week’s other events

  • Staying with the PMI theme, Chinese Manufacturing PMI from the private Caixin survey slipped from 50.8 to 50.6 (50.7 was expected), whilst the Caixin Services PMI fell from 52.8 to 51.5 (52.6 was expected)
  • UK like-for-like sales were reported by the British Retail Consortium as rising 0.2% yoy from 0.5% previously. The Halifax House Price report showed house prices rose 3.7% compared to a year earlier
  • In Japan, Services PMI ticked up from 51.3 to 51.5. Labor Cash Earnings slowed sharply from 3.6% to 1.5% yoy, disappointing expectations for 2.4%, whilst the forward-looking Leading Index slipped from 104.7 to 103.5

The markets

September started on a tough note, with weakness across the board in equities, fixed income and commodities.

One-month performance of major asset classes in sterling terms


Equity markets started the month on a sour note, with falls across major markets. Of the developed regions we focus on, the Japanese TOPIX was the worst performer, down -2.9% on the week, with Europe (excluding the UK) and the UK just behind, falling -2.4% and -2.0% respectively (both using MSCI indices). In the US, the S&P 500 slipped -1.0%, whilst the MSCI Emerging Markets index was down -2.6%.


Sovereign bonds were no safe haven last week either. 10-year US Treasury yields rose 8 basis points (bps) to finish at 2.94%, whilst the equivalent UK gilt yields rose 3 bps to 1.46%. In Germany, 10-year bund yields were 6 bps higher, closing at 0.39% whilst 10-year Japanese government bond yields were allowed to drift higher to 0.11% by Friday.


Gold fell through the US$1,200 mark to finish the week at US$1,197 per ounce. Oil eased up, but only marginally, with Brent Crude ending the week at US$76.83 per barrel, and copper dipped to US$2.60 per lb.


Currency moves were fairly limited overall. The US dollar and yen gained against sterling, whilst the euro was broadly weaker. Sterling closed on Friday at US$1.29, €1.12 and ¥143.

The week ahead

Unusually for the week after payrolls, it’s a very busy week ahead. There are two Central bank meetings, Industrial Production and some inflation data all of potential interest in addition to the trade and political developments. The Bank of England (BoE) and European Central Bank (ECB) both conclude their monetary policy meetings on Thursday, and whilst it is extremely unlikely that there will be any formal policy changes, the statements and press conferences may signal any shifts in the collective thinking with regard to monetary policy – in particular there is a likelihood that the ECB confirms its intention to end its quantitative easing programme by the end of the year.

In terms of Industrial Production, we get the UK numbers on Monday (no change at 1.1% yoy expected), Eurozone Industrial Production on Wednesday (a slowdown from 1.1% from 2.5% is forecast), Chinese Industrial Production as part of the regular release early on Friday morning (6.2% from 6.0% yoy is forecast) and US Industrial Production on Friday afternoon (0.3% month on month from 0.1% expected).

For inflation, Chinese CPI is reported early in the morning on Monday (no change at 2.1% yoy expected) whilst US CPI is out on Thursday (a slowdown from 2.9% to 2.8% yoy is forecast). We can also expect there to be interest in what the Turkish Central bank has to say and do this week, and the world is poised for the imposition of further US tariffs on China after consultation of the latest round closed last week. The daily breakdown is as follows:

Monday: As well as UK Industrial Production and Chinese CPI inflation data (covered above) we will also get the Eco Watchers Survey output from Japan early in the morning, whilst later in the morning we have UK trade data and Eurozone Investor Confidence to look forward to.

Tuesday: Japan reports Machine Tool Orders, followed by the latest UK employment report, where average weekly earnings (2.5% yoy from 2.4% expected on a last-three-month basis) will be of interest. The output from the latest ZEW business surveys in the Eurozone are also due out, as is the Small Business Optimism report from the NFIB in the US.

Wednesday: Aside from the Eurozone Industrial Production data above, the only other point of note on the schedule for Wednesday is the release of the US Federal Reserve’s ‘Beige Book’ which contains anecdotal reports on the state of the US economy.

Thursday: Thursday is the busiest day, with the key points of the BoE and ECB meetings as well as the US CPI numbers, all of which were covered above. Japan will also update the Core Machine Orders.

Friday: There is also plenty to be excited about on Friday. Overnight, the regular batch release from China is due out which, as well as Industrial Production (covered above), also includes Retail Sales (no change at 8.8% yoy expected) and Fixed Asset Investment (5.6% from 5.5% year to date yoy). In the afternoon, the US reports Retail Sales (0.4% from 0.5% month on month expected) as well as trade data and expectations surveys from the University of Michigan, on top of the Industrial Production numbers covered above.


This article was previously published on Tilney prior to the launch of Evelyn Partners.