- Japanese Machine Orders
- French Industrial Production
- Bank of England Rate Decision
- Canadian Trade Balance
- U.S. Trade Balance
- U of M Consumer Confidence
Japanese Machine Orders (SEP) (05:00 GMT; 00:00 EST)
Previous: 8.2 %
Outlook: -6.1 %
Outlook: After soaring during August, Japanese machine orders are expected to have dropped from August to September by 6.1 percent however still posting a large gain, 8.9 percent, over last September's orders. Manufacturing in the US, Japan's largest trading partner, rose during September pushing up the foreign demand for machinery. Japan's economy also continued to expand during the month although not quite as fast as the months prior as the booming economy begins to curb its growth a bit. Record oil prices during the month have also hurt demand and hurt companies' budgets as companies take a hit from high energy costs but are still cautious of passing on the higher costs to consumers.
Previous: Japanese machine orders, excluding shipping and utilities, jumped more than triple the expected, by 8.2 percent, in August as companies began to equip new factories. This is the biggest rise seen since October 2000, after a drop of 4.3 percent in July. Mitsubishi Electric Company and other machinery producers are actually increasing their profit forecasts as domestic and foreign demand jumps for equipment to make cars and liquid-crystal displays. Capital spending, one of the driving forces behind Japan's growth, is looking to continue to increase steadily after the jump during August. Carmakers are spending record amounts as demand for Japanese cars soar in the country and abroad. Also, as Japan comes closer to seeing the end of deflation and the Bank of Japan looks to finally tighten is extremely loose monetary policy possibly as early as the beginning of next year, companies will be looking to invest in capital spending to beat an impending hike in interest rates.
French Industrial Production (SEP) (07:40 GMT; 02:40 EST)
Consensus: 0.5% (MoM); -0.2% (YoY)
Previous: 0.8% (MoM); 1.0% (YoY)
French Manufacturing Production (SEP)
Consensus: 0.5% (MoM); -0.7% (YoY)
Previous: 0.7% (MoM); 0.9% (YoY)
Consensus: The trend of strong foreign demand resulting largely from a relatively weak Euro this year suggests that industrial and manufacturing production in France is likely to continue to expand. However, the rate of this expansion is expected to decrease in September. As oil prices spiked towards the end of August, domestic demand for industrial and manufactured goods suffered dramatically. Additionally, the cost of producing these items soared. The French Producer Price Index indicated that producer's prices inflated by 0.6% in September as opposed to 0.3% the month before. This inflation was lead by a 2.4% rise in the cost of energy products. Although steep production prices will weigh in on industrial and manufacturing expansion, the sectors are likely to continue their trend in growth as suggested by the manufacturing Purchasing Manger's Index, which gave a reading of 52.7 in September. A reading above 50 indicates expansion in the manufacturing sector.
Previous: In August, French industrial production exceeded economists' growth estimates of 0.6% when production numbers increased at a rate of 0.8%--the fastest pace of growth since September 2004. Manufacturing production in France expanded by 0.7%, which like industrial production, had declined at a nearly equivalent rate the previous month. The boost in production supported estimates that French GDP will expand at a quicker rate in the third quarter. General depreciation of the Euro this year has made French goods cheaper, moving manufacturers to speed up production to meet foreign demand. Production of components, including minerals, plastic, and computer chips, rose by 1.9%. Similarly, production of consumer and capital goods increased in August. Car production, on the other hand, was the largest receding sector posting losses of 3.1%.
Bank of England Rate Decision (12:00 GMT; 07:00 EST)
Previous: 4.50%
Consensus: 4.50%
Outlook: The Bank of England is expected to keep the overnight lending rate unchanged at 4.50 percent at its policy meeting as inflation continues to pick up despite a slowing economy. The five members that voted to lower the lending rate in August decided to focus on a slowing economy rather than the inflation when deciding on their policy stance. Since then, significant economic expansion has not materialized, but the cheaper lending rates have sparked inflation. Price growth among consumer goods rose to 2.5 percent in September, the fastest pace in over eight years, as the burden at the pump saddled another layer on retailers' attempts to pass on rising costs. Another affect of the lower borrowing rates came with a big return in housing prices. A read of housing prices by the Nationwide Building Society reported prices rose 1.3 percent, the most in 15 months in September. Over the same period, loan approvals by U.K. mortgage lenders reached a 15 month high, indicating price growth will carry over in the following month. Economic growth in the third quarter reportedly slowed 0.4 percent from 0.5 percent expansion in the three months ending in June. Growth looks to continue its softening trend into the final quarter as consumer confidence remains on the rocks. Consumer spending accounts for nearly two-thirds of the economy and recent indicators hint that there is unlikely to be any support from citizens for the final months of the year. As prices rose to their high in September, annual growth in retail sales responded by slowing to 0.7 percent, the slowest pace in nine years. And looking at consumer confidence at its worst level in two and a half years in October, there is little supporting a return in consumer demand. Considering these issues, policy makers will likely pass on the opportunity to change the benchmark rate.
Previous: The Monetary Policy Committee kept the overnight lending rate unchanged at 4.50% for the second consecutive month at its October 5th and 6th meeting as headline inflation remained a sticky issue for further policy changes. Bank officials have had to put their skirmish with rapid price growth on hold as energy prices jeopardize economic growth. The price per barrel of Brent crude rose to a record $70.80 in late August, pushing inflation to 2.4 percent over the previous month - well above the bank's target level of 2 percent. Some officials that were calling for the loosening policy in August, opined that the effects of higher energy prices were intermediate, rather than long-term, and that policy should not be determined on those terms. More committee members switched from this view for the next meeting however after energy prices went for another leg of appreciation since the August meeting. Despite an easing in the crude prices in September, petrol and natural gas prices did not return lower in turn. This inelasticity in the price for this necessary resource has proven a burden for consumers and their spending habits. In August retail sales slowed to 1.0 percent from 1.4 the month before while a measure of consumer sentiment fell to a read of -5 for September, the lowest level in almost a year. This decline in demand led directly to another month of month of week manufacturing figures. Factory production fell 0.2 percent in August after barely rising in July.
Canada International Merchandise Exchange (SEP) (13:30 GMT; 08:30 EST)
Previous: C$6.0B
Consensus: C$5.6B
Outlook: Economists estimate Canada's trade surplus rose to C$6.0 billion in September, a fresh yearly high. The Statistics Canada published indicator will likely report the rise as exports of commodities and energy products continue to float the measure. Crude oil, the chief export for the country over the past several years, eased off of late August highs, but prices sustained a level above $60 per barrel with frequent supply scares creating numerous bouts of spiked demand. Other commodity prices will also contribute to a potential rise in the balance. Prices of some key commodities, such as cattle, lumber and copper witnessed significant appreciation in September. Shipments of live cattle continued to rise following the lifting of the ban in the U.S., while prices for the necessary good rose 13 percent. Lumber exports, which have been hit hard by U.S. tariffs, also benefit the general measure of exports with a 30 percent jump in price month over month. Semi-precious and industrial metals rose broadly with copper leading the way by pushing to recent historical highs. Despite the strength of commodities over the period other factors could reveal an actual number far short of predictions. Imports in September also likely received a boost as a historically low unemployment level and growing wages endowed Canadians with more disposable income with which to purchase foreign goods. The exchange rate will also weigh in after hitting a 13-year low against the U.S. dollar by making Canadian goods more expensive on the global market. An expensive currency has already proven problematic to manufacturers whose orders abroad have noticeably fallen month after month.
Previous: Canada's trade balance grew to its largest level in a year in August with exports of energy products accompanied increased trade in other commodities and autos. A beneficial rise in the price of energy boosted Canada's surplus to C$5.57 billion following a revised down C$4.89 billion surplus in July. Energy shipments have played a major part in sustaining the trade surplus over the past years with current estimates placing the sectors weight at a hefty 85 percent of the surplus. With the price of Brent crude in the U.S. posting consistently new record highs nearly every day, Canadian oil producers looked to profit. Where as energy products contributed to the bulk of the 1.5 percent rise in exports, other goods have also played their part. Foreign demand for autos and related auto parts rose 2.8 percent over for the month as dealers at shipments' destinations moved inventories through discounts and other methods. Exports of metals and agricultural goods also rose. Prices of industrial and precious metals that Canadian producers mine, say steady, consistent increases through the month with demand keeping constant. Agricultural goods performed particularly well in August with a 9.2 percent surge. Headlining the big jump was an increase in live cattle exports after U.S. officials dropped a ban on Canadian cattle that was imposed following the mad cow disease scare.
U.S. Trade Balance (SEP) (13:30 GMT; 08:30 EST)
Previous: -$59.0 B
Consensus: -$61.0 B
Outlook: The trade deficit the U.S. shares with the world is expected to have grown to a record level in September with the consensus among economists predicting a net $61.0 billion of imports over the level of exports. September's import and export price index figures released by the Labor department have already provided a preliminary consensus that a new record is in store. Import prices advanced 2.3 percent in September, the largest monthly increase since October of 1990. The price of petroleum products paced the index with a 7.3 percent jump in prices for the period. Over the previous twelve months, the price of Brent crude rose nearly 40 percent in September. Also in September, imports excluding petroleum products rose over the period 1.2 percent, making for the largest one-month rise for the component since publication of the index in 1988. Prices for natural gas, chemicals, building materials and some metals factored the most into the number. Exports over the period made a valiant effort at paring the balance. Prices for U.S. goods sold abroad rose 0.9 percent from August, the largest increase since April of 1995. The rise came predominately from non agricultural goods. Despite the hard figures offered by the price indices, there are still many factors that could prove demand played a large role in either stemming or extending the deficit beyond expectations. Chief among the unknown variables will be the full extent of the hurricane damage. The displacement of people, loss of jobs and slowdown in commerce could have deterred citizens from buying foreign goods, trimming back purchases of foreign goods. While at the same time, crippled U.S. businesses and relief efforts could have required an increase in purchases of imports. However September's balance posts, the deficit is expected to bounce back in further months as energy prices retreat and ease much of the pressure it has placed on economic growth.
Previous: The United States' trade deficit ballooned back up to $59.0 billion in August, once again nearing the record $60.4 billion the measure reached in February. Contributing to the ever burdensome deficit for the period were import prices rising to their highest level in recent history and strong demand among U.S. citizens. Overall, import prices grew to their largest level since being recorded to $167.2 billion, a 1.8 percent increase from the previous month. Over the month, imports of crude oil have contributed to the bulk of the deficit and, in effect, have weighted the balance to the level it currently resides. Excluding the $17.2 billion worth of oil imports, an all-time high, the deficit actually narrowed to $38.4 billion. In fact, the trade deficit with the Organization of Petroleum Exporting Countries has widened to $9 billion, trumping both those with Japan and Canada. Demand for foreign goods among U.S. consumers has also played its part in making the deficit the third-largest on record. Growth is expected to expand by 3.5 percent this year, outpacing all of the U.S.'s largest trading partners. Rising demand for automobiles, industrial equipment and textiles contributed broadly. As consumers become increasingly concerned with the price at the pump, potential car owners have been looking towards foreign autos that have, on average, better fuel economy. Purchases of imported autos and parts rose 5.9 percent over the period. Textiles from abroad are highlighted by trade with China. A artificially low exchange rate has caused textiles goods from China to have risen 3.1 percent in August, contributing to the countries' record $18.5 billion trade surplus with the United States. Despite the seemingly one sided shift in the balance, exports have played their part in keep the deficit from blowing up further than it already has. Exports, over the same period, also grew at a record pace expanding 1.7 percent to $108.7 billion. Sales of American goods to Asian countries have been specifically strong with robust economic growth in the area.
University of Michigan (NOV P) (14:45 GMT; 09:45 EST)
Previous: 74.2
Consensus: 76.8
Outlook: The University of Michigan's measure of consumer confidence is expected to rebound to 76.8 in November from 74.2 the month before. The phoned survey of 1000 households is expected to reflect that consumer sentiment will strengthen in November as energy prices ease and the holiday shopping season approaches. Americans have received a break from record breaking gasoline prices this month and last as the price of crude oil has relaxed, but energy prices will not be far from their minds. As the temperature drops outside with the oncoming of winter, heating oil prices will naturally increase with the rising demand. A true testament to the equilibrium price for energy will certainly be established after cold weather has come and gone and prices have responded in return. The seasonal effects of the cold whether also come along with the holiday season which will draw shoppers into stores. Though retailers generally do not see the boost in sales come until after Thanksgiving; recent sales figures may encourage big stores to initiate larger discounts earlier to hopefully bring in beleaguered consumers.
Previous: Consumer optimism fell to its lowest level in 13 years last month with the populace forced to shift a larger portion of their disposable income to pay for higher energy prices. Higher costs both at the pump and for heating bills due have consumed much of money added to the economy from steady levels of job and wage growth. The average price for a gallon of gasoline has fallen significantly from the $3.069 level seen in the opening week of September to a recent $2.605 on the 24th of October, but it is still remains significantly higher than a year ago with many consumers concerned record prices will be meet once again in the future. Another issue on Americans' minds comes with the steady pace of rising lending rates. The Federal Open Market Committee has held to a steady diet of 25 basis point hikes to the federal fund rate. This has resulted in higher borrowing rates on credit cards and for mortgages for consumers. The current conditions index measuring the perception of whether it is a goods tome to make big-ticket purchase fell to 91.2 in October further establishing consumers' fears over their financial situations.
Richard Lee is a Currency Strategist at FXCM.
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