Tomorrow's Economic Releases: Swissie Data Runs Heavy
2. Swiss Producer andamp; Import Prices
3. UK Retail Sales
Swiss Trade Balance (francs) (JUN) (06:15 GMT; 02:15 EST)
Outlook: The Swiss trade balance for the month of June is expected to improve to 1.30 billion Swiss francs, up from the revised 1.04 billion in May. While the economy improves on strong domestic demand, shipments destined for outside its boarders continues to underpin the aggressive pace of growth the Switzerland has been enjoying. Foreign trade accounts for almost half of the Swiss economy, while nearly two thirds of that trade is with the European Union. Furthermore, a quarter of Swiss exports head to Germany, which has seen adequate growth of late, but dismally low ZEW future surveys could portray a rough picture ahead. Swiss GDP for the first quarter was up 0.9% from the final three months last year, while annual growth was up 3.5%. Reciprocating the economic potential back into the economy, improvements in most sectors of the economy have pushed unemployment to recent lows of 3.1% in June. Additionally, the more liberal spending habits of Swiss consumers for foreign goods is likely to keep inflationary pressures on. As such, the central bank lending rate has increased to 1.50% and future rate hikes are expected.
Previous: The Swiss surplus in May was revised down from an initial reading 1.21 billion francs to 1.04 billion ($840 million). While the original read was strong, the revised number was lower than expectations. Exports jumped 21.3% form the same period a year ago to 15.2 billion francs, while imports rose 22.8% to 13.98 billion francs. Two extra business days contributed to the surplus, which expanded from CHF 721 million in April. The numbers show sustained improvements in an already booming economy. After the two recent rate hikes by the Swiss National Bank, in December of 2005 and March of 2006, the continued strength in exports should help to fund consumers ability to absorb the higher cost of living.
Swiss Producer andamp; Import Prices (JUN) (07:15 GMT; 03:15 EST)
Consensus: -0.3% 2.9%
Previous: 0.6% 2.8%
Outlook: Swiss producer and import prices are expected to have produced a slight monthly decline yet mild year over year increase in June. The 0.3% decline would be the first of the year, and a strong reversal from the 0.6% increase in May. The forecasted fall comes despite an increase in raw materials costs. Oil prices, however, showed a minor retracement below the previous high of $75 and helped to cool some of the costs of business. Should the numbers come in as expected, the SNB could find reason to ease up on their pace in September. However, most analysts agree that barring a major surprise to the downside rate hikes will continue as planned in the Swiss economy, with the persistence of annual numbers. Furthermore, improving wages and low unemployment are improving domestic demand and increasing disposable income, which has allowed producers to pass more of the bill onto consumers, driving up CPI as well.
Previous: Swiss producer and import prices rose at their fastest rate in almost five years in May, as oil surged above $75 a barrel and the economy continued on its impressive pace. Month over month, growth remained positive at 0.6% for the sixth straight month, but slightly off of the all-time high of 0.8% established in April. Annualized growth was forecast to increase from 1.9% in April to 2.4%, but exceeded expectations to 2.8% with oil's jump. The number is coming very close to surpassing the all-time high established in November of 2000, when the index registered a tremendous 3.0% gait.
UK Retail Sales (JUN) (08:30 GMT; 04:30 EST)
Consensus: 0.4% 2.9%
Previous: 0.5% 4.0%
Outlook: Retail sales growth is expected to continue in May, but at a slower pace. From the month before sales are predicted to have risen 0.4%, while the year over year rate is expected to ease to 2.9% from 4.0%. World Cup is expected to have kept consumers in a purchasing mood, but the early exit of Englands team could have brought a slight drop in the near-term. For comparison, the British Retail Consortium's retail sales indicator posted a 4.7% annual increase, down from 6.2% in May. The two have proven a positive correlation in the past so a cooling in the government read is well based. Overall, consumer spending looks set to rebound from the sharp drop sustained in the first quarter of the year. Almost two thirds of UK GDP is derived from domestic spending, so sustained strength in the sector bodes very well for pound bulls. The Bank of England is expected to raise rates at least once before the close of this year, and strong domestic sales could necessitate it sooner rather than later.
Previous: Retail sales in the UK grew for the fourth straight month in May as the "World Cup Effect" continued to boost sales. Month over month growth remained bulked 0.5%, but was slightly slower than the 0.7% rate seen in April and off of the year's high of 0.9%. Electronics sales over the period saw a 0.7% increase as television sales received a major boost from the world's biggest sporting event. The strongest gainer was clothing andamp; textiles, up 1.5%.