Afternoon analysis 31.08.2016

The ADP data from the American labor market appeared to be slightly better than expected and is extending a positive condition of the dollar. Slightly higher inflation reading from Poland is not changing the perspectives for the PLN. The market will focus on the PMI reading tomorrow.

Positive ADP data

If we would like to base on macroeconomic data in the context of real economic condition instead of emotions, today's ADP reading should cause the Friday payrolls to lose significance.

According to the ADP data, the amount of new workplaces in the American non-agricultural sector increased by 177k. This is 2k more than the Bloomberg agency consensus predicted. In general, the difference is marginal. Therefore, this should not impact evaluation of the dollar, as well as the treasury bonds. However, the July data has been revised up by 15k (to 194k). This allows us to consider this data as relatively positive.

However, there is a question, is this data positive enough to cause an increase in likelihood of rate hikes. Most likely no, because it seems that the Federal Reserve would need a stronger increase in workplaces (more than 200k), which would be confirmed by a strong increase in salaries (at least at the level of 2.7% y/y).

On the other hand, if the payrolls are really definitively above the consensus, we should expect that the better data is a result of a statistical disturbance rather than a real increase in the amount of workplaces. This is because in the short-term the ADP data reflects significantly better a real change in employment (lower average fluctuations) than the data from the Bureau of Labor Statistics (BLS).

However, both of these publications are the same in the long-term. The average from three past years shows that according to the ADP (without today's data) an increase in the amount of workplaces in the private sector was 208.6k per month. The BLS data show an increase at the level of 210.8k. Therefore, the difference in the long-term is minimal, as well as very large in the short-term. The difference in May was at the level of 180k.

Zloty remains weak

The market received the Polish Central Statistical Office (GUS) data for August at 14.00 (2.00 PM). The reading was at the level of negative 0.9% y/y (0.1 percentage point above the consensus). However, there is now way that this data will change the perspective for the zloty. It remains negative, at least before the decision of Moody's regarding Poland's rating, as well as the MPC meeting on Wednesday.

It's worth focusing on the PMI data from the Polish industry tomorrow. Last month's reading was weak (50.3 points). This is very near the 50 level, which separates particular sector's progress from its regress. Even a slight descent below this level (which is quite likely) may extend a negative series of Polish data, as well as have a negative impact on the PLN.