- New Zealand ANZ-Business PMI
- U.S. Durable Goods Orders
- Tokyo Consumer Price Index
- Japanese Retail Trade
New Zealand ANZ- Business NZ PMI (DEC) (12:00 GMT, 7:00 EST)
Consensus: N/A
Previous: 52.3
Outlook: Tomorrowâ,"s ANZ Business PMI index may provide further evidence that the private sector is suffering from an appreciated New Zealand domestic currency. Record high interest rates have resulted in historically low business confidence by raising the cost of money and dampening future growth prospects, lending to a lower PMI for December. The 7.25 interest rate has continued to hurt manufacturers in light of foreign investors taking advantage of the high interest rate. Subsequently, employment, a subcategory of the ANZ Business PMI index, is likely to be hurt by increasing competition with countries that offer cheaper labor. As a result, it has become clearer that as Bollard maintains the 7.25 overnight lending rate to fight inflation, consumer and business confidence will continue to falter.
Previous: Although up from a decline of Octoberâ,"s 49.6, Novemberâ,"s PMI value of 52.3 does not compare to the past three years of strong expansion, with previous manufacturing figures ranging from 64.4 to 65.9. Nevertheless, production and stocks of finished products boosted the PMI index reading in at 53.9 and 53.7 respectively for the month. The high valuation of the domestic kiwi has affected exporting manufacturers negatively while consumers consider imported goods cheaper. Ultimately, raising rates nine times since January of 2004 has taken its toll on consumers. High rates have curbed consumer spending, which makes up 60 percent of New Zealandâ,"s economy. Subsequently, economic growth is expected to slow to 1.6 percent in 2006 from 2.4 percent in 2004.
US Durable Goods Orders (DEC) (13:30 GMT, 8:30 EST)
Consensus: 1.0%
Previous: 4.4%
Outlook: New orders for durable goods are expected to rise 1% in December, marking the third consecutive monthly increase. While the report tends to be skewed by volatile aircraft and defense components, the core measure - minus transportation - is also expected to gain 1%. As corporations continue to boast strong balance sheets and hoards of cash, business investment in factories and equipment are likely to fuel the growth in demand for new orders. This was evidenced in last monthâ,"s industrial production report, which notched a 0.6% gain on the back of a reconstruction boom in the Gulf Coast. Additionally, Boeing increased their aircraft orders by 30% over the previous month, lending further support to an upside reading. Regardless, traders should really be keeping a close eye on the sector breakdown of the report, as orders for non-defense capital goods can be considered a leading indicator of manufacturing activity. With business spending expected to float the economy in 2006, a bullish reading may put the Federal Reserve back on track to continue itsâ," tightening.
Previous: Durable goods orders climbed 4.4% in November, a significant increase from the 3% gain in October. Fueled primarily by a surge in civilian aircraft orders, the actual core reading excluding transportation fell 0.6%. Non-defense capital goods - seen as a good barometer of businessesâ," plans to expand and modernize - was most notable on the report, surging 19.6%. While durable goods overall showcased the largest increase since May, the market seemed to be more concerned with the core reading as the third monthly decline resulted in bearish sentiment. With consumer spending recently showing some weakness, traders will be looking for positive readings in the core number to maintain their optimistic outlook for 2006.
Tokyo Consumer Price Index (MoM) (JAN) (23:30 GMT, 18:30 EST)
Consensus: 0.1%
Previous: 0.1%
Outlook: The Bank of Japan has been clear that stabilizing or incremental increases in consumer price are necessary before Japan loosens their â,"quantitative easing policy.â, Consumer prices, the benchmark for Japanâ,"s monetary policy, are expected to remain steady at 0.1 percent. Core CPI, which excludes the volatile fresh food component is also expected to remain steady at 0.0 percent. However, whether to exclude the recent volatile energy prices while calculating consumer prices has been a topic of discussion as Japan is trying to find the most accurate figure. In the past, lackluster consumer prices have eaten away at business profits causing a ripple effect in declining consumer confidence and spending. Consequently, Japanâ,"s growth rate has been limited to 1.2 percent over the past 5 years. Looking for clear signs of growth before making any changes to interest rates, the focus remains on whether consumer prices have stabilized.
Previous: In December, consumer prices in Japan remained stable at 0.1 percent. Most notably, the transportation and communication sector in Japanâ,"s capital increased the most from November, rising 0.2 percent. With consumer prices holding steady, this may be the first sign of nascent inflationary suggestions in the worldâ,"s second largest economy. Consumer spending, accounting for the bulk of Japanâ,"s economy, has flourished due to higher earnings and an increase in business investment. After several years of bad debt, businesses are finally beginning to recover by ridding themselves of extra liabilities. Incidentally, the improved business performance resulted in higher earnings, which in turn prompted consumer spending to thrive.
Japanese Retail Trade (DEC P) (23:50 GMT, 18:50 EST)
Consensus: 0.4%
Previous: -0.2%
Outlook: It is likely that Japanâ,"s retail trade will show an increase for December, due to improvements in working conditions. After last months 0.2 percent decline, this month should show a favorable result of a 0.4 percent increase. Unemployment in Japan is expected to show a slight decline to 4.5 percent for December, after Novemberâ,"s unexpected rise to 4.6 percent. This decline in unemployment should fuel household spending and individual consumption in the month. Incidentally, Decemberâ,"s workers household spending is expected to show an increase of 2.7 percent over the year. This strong increase in spending should trickle down to the retail sector which should experience increased sales. The Bank of Japan is looking for a more longstanding growth in consumer spending before concluding that deflationary times are over. A positive reading for retail trade in December would be one piece of evidence to indicate that in fact the Japanese consumer is ready to spend, however it will likely not be enough as the last three months have shown declines.
Previous: Japanâ,"s retail trade fell for November as declines in working conditions led to limited spending for the month. Retail trade fell by 0.2 percent for the month after falling 0.4 percent in October and 0.8 percent in September. Novemberâ,"s decline is being attributed to rises in unemployment and decreased wages which led consumers to cut back on their spending habits. Unemployment rose to 4.6 percent in November. With more people seeking jobs this year, employers were able to cut back wages which in November had fallen by 0.8 percent for the year. As a result of the decline in working conditions, workerâ,"s household spending decreased for November by 0.7 percent from October.
Richard Lee is a Currency Strategist at FXCM.
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