1. Japanese Eco Watchers: Outlook
2. Japanese Machine Tool Orders
3. German Trade Balance
4. UK Visible Trade Balance

Japanese Eco Watchers: Outlook (OCT) (05:00 GMT; 00:00 EST)
Consensus: --
Previous: 53.1

Outlook:  The Economic and Social Research Institute's survey of Japan's economy looking three to six months into the future may very well see a positive shift in October as consumer spending and expected export growth offset disappointing capital expenditures. Household spending has not grown in seven of the last eight months despite improving employment and wages. The Japanese unemployment rate has fallen to a seven-year low 4.2 percent in September while wages are exhibiting growth as well. Though energy prices have definitely been a negative factor on other forms of spending recently, stable oil prices through the winter months could foster a more liberal attitude toward consumers' spending habits.  Exports have also entered a positive trend with the trade surplus rebounding to a five month high Â¥954 billion in September. On the other hand, businesses have not been so confident. The deflationary economy has left many business leaders unable to pass on rising costs of raw materials. In spite of this, hope remains as capital spending has posted 6.7 and 6.9 percent growth over the past two quarters, following the disappointing 3.0 read in the first three months of the year. Another bastion of optimism rests with the recent statements coming out of the Bank of Japan expressing a forecast for the deflationary environment to end by 2006. Subsequently, the Eco Watchers outlook should reflect these positive changes for the economy.

Previous: The outlook for the world's second largest economy rose to the highest level in fourteen months with the Eco Watchers index increasing to 53.1. September has proven to be an encouraging month for Japan's future as commodity prices came off of record highs and an improved political picture gave reason for optimism. One of the biggest concerns for consumers and producers alike has been oil. After reaching an all-time high of $70.85 per barrel on August 30th, oil prices have fallen significantly. Also over the period, the response to the increase to prices for the raw material has shown that producers have weathered the tough period well.  Another cause for optimism was found in the outcome of the general election called by Prime Minister Junichiro Koizumi following the failure of his postal service privatization bill. The vote on September 11th proved there was overwhelming confidence in Koizumi and his decidedly economically beneficial policies. With the confidence of the people behind him, Koizumi will be able to go forward with his bills and shift a large chunk of government spending in order to better stimulate the economy.

Japanese Machine Tool Orders (YoY) (OCT P)
Consensus: --
Previous: 3.6%

Outlook: Although there is no official consensus on how Japanese machine tool orders have behaved for October, orders will probably take on a reduced rate of growth from the month before. Most recently, consumer spending in Japan has taken a hit as a result of oil prices being higher than consumers are comfortable with. This, in turn, has dampened Japanese industrial production as manufacturers slow their pace of expansion in response to weak consumer demand. It is likely, therefore, that machine tool orders will suffer in October as manufacturers add less machinery and require fewer tools to service their machinery. On an industry-specific level, Japanese car sales tapered in October. In past months, machine tool orders gained on increased automobile production. Fewer auto sales of late, however, have probably translated into limited production and ultimately fewer machine tool orders.

Previous: Japanese orders for machine tools rose by 3.6% in September from a year earlier, revised from an initial reading of 2.2%. The increase was lead by foreign demand as export orders for Japanese machine tools expanded by 5.3% compared to a rise in domestic orders of just 2.2%. It is no surprise that foreign orders were responsible for the bulk of the increase given that household spending in Japan fell 0.2% in September, which curbed industrial production and, in turn, reduced the need for machine tools in the domestic industrial sector. In contrast, Japanese exports rose 8.8% on the month to a record 5.9 trillion yen, evidencing the strong foreign demand for Japanese machine tools. Orders for tools used in precision machinery posted the largest gains and the number of orders for tools used in electrical machinery declined by 30.8%.

German Trade Balance (SEP)
Consensus: â,¬13.0B
Previous: â,¬11.6B

Outlook: The German trade surplus is looking to have gained during September, rising to â,¬13.0 billion, after a contraction in August. The continual drop in the value of the euro is helping demand for exports; however record high oil prices are beginning to weigh on the global economy's slowing demand in general. The US, one of Germany's largest trade partners, was hard hit bay two major hurricanes at the beginning of the month, hurting their demand for German goods. However, imports may have been harder hit in September, with domestic household spending suffering and retail sales falling the most in a year during September. Consumers lost confidence as unemployment remains at post-World War II highs and political turmoil continues over the September 18 election results.

Previous: In August, German exports skyrocketed, boosted by the drop in the euro, rising the most since January. With economists expecting a 1 percent gain in exports, they actually rose by a revised 3.4 percent during the month, nearly doubling the highest forecast in the survey. Demand for imports to Germany also boomed jumping a revised 5.8 percent. This caused a narrowing of the trade balance to â,¬11.6 billion in August. Despite the small narrowing of the surplus, these trade numbers are good news for Germany. The export market is the main driver of economic expansion in the country that is currently haunted by 11.7 percent unemployment and dwindling household spending. However, just a boost in demand from abroad will not be enough to pull up the German economy; there must be more domestic activity. Also, the fall in the euro is making German products seem more affordable abroad but is actually having a magnifying effect on already high oil prices denominated in the stronger dollar, causing businesses to contemplate raising prices to compensate.

UK Visible Trade Balance (SEP) (9:30 GMT, 4:30AM EST)
Consensus: -£5,300.0M
Previous: -£5,621.0M

Outlook: The UK visible trade balance is expected to rebound in September to -£5,300.0M after expanding to a record -£5,621.0M in August. This number was highly distorted due to changes in the price of fuel between July and August. The average price paid for fuel imports increased by almost 9.7% in that month alone. As oil prices peaked towards the end of August, they edged down slightly over the month of September, which will give some relief to the trade balance. However, the CBI Industrial Trends Survey also revealed that export orders "weakened significantly" in September, which puts a bit of downward risk on the outlook for goods exports excluding oil and erratics. Although this puts the UK's third quarter GDP in a precarious position, the trade picture is likely to continue improving over the medium term. The latest released numbers showed that between June and August, the UK trade balance improved by £155M in total, or £1,166M excluding oil and erratics, compared to the three months between March and May. As the global economy improves, there is a good chance that this trend will continue especially if oil prices stay tame in the next few months.

Previous: In August, the UK's trade balance in goods widened by £100M to a record -£5,621.0M on oil imports. The month marked the first time in nearly a year that the UK was a net importer of oil. Excluding oil and erratics from the calculation leaves a balance of -£5,005.0M compared to a balance of -£5,525.0M in July. Although the headline figure was not encouraging, the core figure shows that the UK actually sold 7.1% more goods to the rest of the world while imports only increased by 2.6% compared to July. Of these goods, car exports rose by 38% while capital goods exports rose 3.5%, showing that external trade is giving a boost to UK manufacturers. However, while this underlying trend paints a positive picture for the UK's economic future, changes in trade of oil and erratics could still be negative factors in quarterly GDP growth figures, which are likely to remain subdued in the short term.

Richard Lee is a Currency Strategist at FXCM.