- Workers' Household Spending
- Japanese Industrial Production
- U.S. GDP Annualized
- U.S. Initial Jobless Claims
- Canadian Industrial Product Price
Workers' Household Spending (MoM) (Aug) (23:30 GMT, 19:30 EDT)
Consensus: n/a
Previous: -3.5%
Outlook: An expected decrease in Japan's workers' household spending can partly be attributed to disappointing consumer spending and retail sales for the month of August. Pacing the decrease in spending were transportation, communication and education expenses. Spending on cars and telecommunications also declined after increasing 7.5 percent in June. Unemployment has played a large role in consumer spending, rising 4.4 percent this month, besting analysts' predictions. Female unemployment rates alone have rose 4.3 percent, the fastest since May 1997. Women are seeking to return to the job market as signs point to an economic recovery from last year's recession. Less optimistic but positive none the less, the number of full-time employees has risen 0.6 percent in July. Consumer spending is still predicted to rise in the coming three to six months as companies look to hire more people amid the expected ripe economic conditions. Putting a damper on optimism is household confidence, rising from 46.6 in June to 48.1 in July. Although it is rising, readings below 50 mean the number of pessimists is greater than the number of optimists, and the July figures do not take into account the effect of rising crude oil prices. Consumer spending, which accounts for over half of the Japanese economy may play less of a role in third quarter growth, however. While Japanese households can conserve energy better than U.S. households, oil prices are still taking its toll on spending and forcing Japanese households to tighten their budget.
Previous: Japan's average monthly household spending dropped 3.5 percent in July to 323,515 yen, marking the fourth straight month of decline. This was against expectations of a monthly 0.9 percent rise. Retail Sales also fell in July to 2.2 percent, breaking forecasts of a more measured 0.5 percent decrease. The shortfall in these numbers to meet expectations is disappointing have proven a worry to those looking for a Japanese recovery. Along with disappointing spending numbers, unemployment broke its optimistic run, rising to 4.4 percent from 4.2 percent the month before. Although this is still near the seven year low, economists were anticipating it would remain unchanged. A rise in wages was pointing to more towards a more optimistic outcome in spending. Rising for five months out of the past six, wages saw their largest increase in eight months, posting a 1.7 percent rise.
Japanese Industrial Production (MoM) (AUG) (23:50 GMT, 19:50 EDT)
Consensus: 1.8%
Previous: -1.2%
Outlook: Production is expected to have returned to positive territory in August, with expectations of a 1.8 percent increase. The effects of higher global oil prices has many manufacturers taking a wait and see approach towards increasing production. This more cautious position during the month came as crude oil continued to climb in price, boosting costs for manufacturers. Some economists predict that Japan could withstand the high oil prices, but the uncertainty will definitely weigh on producers' minds and bottom lines. Analysts are saying production in industries such as the electronic parts is still unstable but are looking to the near future for improvements, while traditional industries such as chemicals and steel remain weak. Still, most analysts are keeping a positive outlook by insisting that production is heading towards an output recovery and forecasting production growth of 2.3 percent for both August and September. For August alone, production is predicted to increase in electronic parts and devices by 8.1 percent and general machinery by 3.3 percent. If these expectations are correct, production could see a 1.3 percent increase for the third quarter.
Previous: Japan's Industrial Production declined by 1.2 percent in July compared to June when production rose 1.6 percent. The decline overshot expectations of a slimmer 0.5 percent drop, adding to predictions of a slow down in growth of the world's second largest economy. Electronic parts and transportation equipment and general machinery manufacturers led the decline in production, offsetting a 5.4 percent increase in the information and communication equipment industry, causing many companies to scale back output to avoid or reduce excess inventories. Production in Japan has fallen for the past four of six months. Year over year, exports fell one percent compared to last July, which is the second decline in three months.
U.S. GDP Annualized (2Q) (12:30 GMT, 08:30 EST)
Consensus: 3.3%
Previous: 3.8%
Outlook: The world's largest economy is expected to have grown at a slower pace in the second quarter as rising energy costs cut into corporate profits and erode consumer confidence. Forecasts for expansion have been steadily downgraded over the past few months, most recently the economists' consensus was revised down from 3.4 percent annual growth 2 months ago to 3.3 percent. Taking the brunt of the blame for the more restrained growth in the second quarter are oil prices. The price per barrel of crude steered back towards a steady rise by mid quarter boosting producers input costs while bleeding consumers' pockets. Consumer spending, which accounts for nearly 70 percent of the economy, advanced at a slower 3 percent in the three months ending June, down from 3.5 percent from the previous three months. Businesses, which burned off excess inventories in the first quarter, increased production moderately in the following three months to restore their stocks contributing to growth remaining north of three percent. Inflation has also played its part in retarding growth. To head off the rapid growth in prices mainly fueled by expensive oil, the Federal Reserve consistently increased the benchmark lending rate, further diminishing business and corporate spending. The Fed is expected to have been successful over the quarter with the GDP price index, the measure for inflation concerning the GDP-followed basket of goods, expected to have remained unchanged with an annual 2.4 percent rate of growth. Despite the measured pace of expansion compared to the 3.8 percent over the first three months of the year, growth has posted above 3 percent for the past nine quarters, the strongest run since the thirteen-straight quarters of 3 percent plus growth ending with the first quarter of 1986. Looking ahead, this pace could be in jeopardy. Hurricane damage and strong appreciation in oil is expected to drastically slow the pace in the third quarter, while rebuilding could bring growth back into line for the fourth. Nevertheless, the U.S. economy remains the strongest industrialized nation in the world.
Previous: The U.S. economy expanded at an annual 3.8 percent in the first three months of the year, beating government forecasts of 3.5 percent growth. Spurring the rebound off of the 3.3 percent growth seen in the fourth quarter of 2004 was continued strength in the job market and corporate profits, helping consumer spending and business investment respectively. Consumer spending rose 3.6 percent, proving citizens were able to weather the initial increase in gasoline prices and sustain expansion that found little help from exports. The widening trade deficit erased 0.58 percent growth over the first quarter. Businesses investment has also played its hand in sustaining the beyond three percent growth that posted for the past eight quarters. Fixed investment by companies, including spending on equipment and software, continued to gain, rising 4.1 percent following a 14.5 percent surge in the final quarter of last year. Government spending changed little from the previous quarter as they continued to struggle with a mounting budget deficit. Monetary policy makers, however, used the strong growth figures to keep their attention on inflation that was not responding to higher crude prices as well as growth. The Fed increased the overnight lending rate in February and March.
U.S. Initial Jobless Claims (SEP 23) (12:30 GMT, 08:30 EST)
Consensus: 420K
Previous: 432K
Outlook: Initial jobless claims are expected to ease off of the record high 432,000 from the week ending September 16th to 420,000. Jobless claims for the second week of the month jumped by the most in more than nine years as displaced workers found their way to limited resources to file. Many victims of the hurricane have still not filed the appropriate paperwork, as slower, more conventional methods have to replace the usual use of the internet to report their situation. As the remnants of Katrina's victims that have not already filed file, claims should begin to fall back to normal levels seen before the disaster. Salvageable in Mississippi and Louisiana will be refilled as the population is slowly allowed to reenter the damaged areas. Additional jobs will also be generated in the reconstruction effort that will follow the clean up. For now however, the near term outlook is not positive. The change in initial claims is generally inversely related to the change in non-farm payrolls, the commonly used measure of job creation for the country. The net change in employed is expected to fall for the first time in 28 months, with forecasts of 168,000 fewer jobs for the economy.
Previous: Jobless claims continued to rise following the 71,000 increase in claims for the week ending the on the 9th of September. Initial claims rose to 432,000 for the week of the 16th, the highest level since June of 2003 as claims continued to trickle in for eligible workers displaced by the devastation imposed on the Gulf coastal region by Hurricane Katrina. The hurricane made landfall on August 29th. Hundreds of thousands of workers were displaced by the storm and thousands of businesses were shuttered up throwing the recently strong job market off kilter. While this event threw ripples through the job market, the rest of the country remained relatively stable. Excluding the claims filed by victims of Katrina, the change was minimal.
Canadian Industrial Product Price (AUG) (12:30 GMT, 8:30 EST)
Consensus: 0.6%
Previous: -0.4%
Outlook: Prices received by manufacturers for finished goods are expected to have risen 0.6 percent in August, returning to positive growth not seen since April. Producers will finally look to pass on higher costs from raw material prices onto Canadian consumers, as no real relief in key materials seems to be on the horizon. Crude prices, which have been favorable to Canadian exporters, has also weighed on manufacturers. The price of oil has continued to float above $60 per barrel for most of August. Another indicator that producers are passing their prices onto retailers and consumers is the recent 0.4 percent rise in consumer prices in July, the eighth straight increase. Facilitating the increase in prices for consumers, the Bank of Canada has recently increased the benchmark lending rate to 2.75 percent.
Previous: Industrial product prices fell the most in eight months in July as the more expensive raw materials continued to bolster costs. Manufacturers have not shifted the burden placed on them by rising raw material prices so as to foster the strong consumer spending that has sustained economic growth amid weaker exports. Canadian producers export many goods to other countries and therefore quote their prices in foreign currencies. Exporters felt the pinch in demand for their products over the period as the domestic currency appreciated 1.4 percent in the month of July, effectively making Canadian goods less attractive to foreign buyers. Domestic spending made up for the short fall in demand for exports, however, but producers were leery to pass on costs to Canadians. The cost for raw materials was up 1.2 percent from June and 13.7 percent from the same period a year ago.
Richard Lee is a Currency Strategist at FXCM.
Free Festival of Traders Videos
