Daily Economic Outlook: 5th August, 2015

Following the tepid improvement and softening of the manufacturing and construction PMIs, respectively, for July, domestic attention will be focused on their services counterpart to round out an initial portrayal of the outlook for Q3. The headline services index rose strongly in June to 58.5. However, several forward-looking components including backlogs of work, business expectations, and especially, new orders, declined on the month. 

"These developments, along with the softening of our Business Confidence Barometer during July, underpin our expectation of a modest easing in the headline index to 57.9", says Lloyds Bank. 

The preliminary Euro area services PMI for July signaled a further moderate gain in output on the month. Although the final estimate is expected to be unchanged at 53.8, the risks are tilted to the upside following an upward revision to the July manufacturing index, possibly reflecting the last-minute agreement on the Greece bailout program.  

Given the unexpected softening of the US ISM manufacturing index for July, its non-manufacturing counterpart, which is published this afternoon, will attract scrutiny for reassurance that Q3 has begun on a firm note. Meanwhile, with continuing employment improvements acknowledged by the FOMC as a key prerequisite for a policy rate hike, this afternoon's ADP report will help to shape sentiment about the labor market ahead of Friday's payrolls release, adds Lloyds Bank.