The coming week is full of numbers, indicators and statistics that can affect the markets.
– This week there’s a lot coming at the same time. We’re looking for all signs that interest rate increases are starting to hurt them, says Harald Magnus Andreessen, chief economist at Sparebank 1 Markets.
The amazing thing now is that families have completely lost heart. People have not looked so sadly at their finances since the banking crisis 30 years ago, at the same time that unemployment was the lowest in ten years, and disposable income has grown steadily in the past two years. Andreessen says it’s not easy to see in the data why people are so worried.
Both Finans Norge’s consumer survey and consumer survey have already reported people’s concerns about the future.
– Now we check a little bit if this translates into behaviour, says Andreessen.
Norway’s Commodity Trade Index has already fallen somewhat from the top during the Corona lockdown.
– It was very high, downward trend.
Home price numbers can show the impact of an interest rate increase
Next day comes the retail numbers Statistics Norway with the so-called credit index. It shows how much debt people have.
– There were no indications that the low interest rates of the past two years had led to the expulsion of families. Now the interest rate is going up, and then you can see the effect of that in the loan numbers, asks the chief economist at Sparebank 1 Markets.
It also comes at the end of the week Figures on housing prices in Norway from Eiendom Norge.
– They flattened it in April, and now in May interest rates are slowly but surely starting to collapse. It wouldn’t be a problem if home prices eventually went down by a little, it could be very healthy.
“We’ve seen, with Stavanger as an example, that house prices can fall a lot, while housing construction is still profitable,” Andreessen says.
The labor market may decline
Perhaps the most important temperature measurement figure in the Norwegian economy at the moment is coming to an end, Friday morning.
– navigator vacancy Show that unemployment has fallen at a tremendous speed. Now we get numbers from May, and they will likely show a further drop in unemployment, Andreessen says.
The level today is already at what Norges Bank believes will be the bottom, he said.
We’ll probably slip under it, too. If not now then in the next few months. The economist at Sparebank 1 Markets explains that companies have high ambitions for hiring companies and that labor migration is not high, given that there is a record labor shortage across Europe.
On Wednesday, data from Norway’s Purchasing Managers’ Index was released. It is expected to confirm what the labor market figures say about the continuing rise in temperatures in the Norwegian economy.
The single most important measure in economics
Abroad, PMIs may dominate the news picture.
The first is ISM index of industry in the United States Wednesday.
It’s our single most important metric. It’s a very good summary of the manuscript and you can plot it against just about anything else and see the connection, says Andreassen.
The rash here may indicate larger things stored elsewhere in the economy.
– We see that the main trend is bearish, in addition to the fact that the closings in China have had some shocks. Before, the barometer dropped from the 1960s to the 1950s. Now it is expected below there.
The number in the ISM index indicates the number of purchasing managers who reported increased activity in their companies, compared to the number of reports that decreased activity. If the number is 50, then there will be the same number of each type, while a number greater than 50 indicates that there are more people who report increased activity than low activity.
The danger here is that the indicator may surprise the downside. If it collapses two to three percentage points, the distance to stagnation is much smaller, then you see the brake trajectories in the economy.
– Several regional measurements I’ve looked at, five out of seven, indicate that the fall may be much larger than expected.
– The next thing on the list is “make it or break it”. “We’ve got three numbers that are important to the US labor market,” Andreessen says.
The inflation that central banks around the world try to stabilize is often determined by the labor market. If wages rise, they will spread to all other prices in the economy and could end up with «spiral wages».
– JOLT Vacancy ReportIt was miles higher than we’ve seen in history. In March, 7.1 percent of all jobs were vacant. The natural rate is less than half that, says the chief economist, and wage growth correlates very closely with the number of job vacancies.
The US governor has now envisioned that he will reduce the number of job vacancies, without raising unemployment. Andreessen thinks it will be difficult.
Traditionally, if you want to reduce the number of vacancies by one percent, you must increase unemployment by two. Now it goes down from 7.1 per cent to 4.0 per cent? This means that the unemployment rate ranges from 3.5 to 9.5 percent.
– It may not happen, but as long as the unemployment rate is from 3.5 to 4.0 percent, there is a recession. Andreessen says you have very little to go on.
He notes that an increase in unemployment of half a percentage point is often referred to as a recession. That equates to 800,000 Americans who are unemployed compared to today.
– The Oslo Stock Exchange has always fallen by 40-50-60 percent. It can happen this time as well, if it always happened before.
On Friday, there will also be headlines during the entire pandemic: “Non-farm payrolls,” the number of jobs created in the US outside of seasonally sensitive agriculture.
Employment growth is not important now. Unemployment and wage growth are now the most important. There may be signs of weak wage growth, which would have been most welcome, but it should come down so much that it’s not clear that wage pressures will subside in time to bring down inflation, Andreessen says.
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