- U.K. GfK Consumer Confidence Survey
- Canadian Gross Domestic Product
- U.S. Consumer Confidence
- New Zealand Trade Balance
U.K. GfK Consumer Confidence (JAN)(10:30 GMT; 05:30 EST)
Consensus: -7
Previous: -9
Outlook: Economists do not expect any major January rebound in U.K. consumer confidence after it fell to its lowest levels since 2003 in December. While median Bloomberg estimates predict a slight increase from -9 to -7, the survey reading will likely show that consumers remain pessimistic on future U.K. economic growth. Relatively strong retail spending in December, however, may indicate that the situation is not as dire as consumer confidence readings predict. The weak headline number may have stemmed from slower than expected wage rate growth ending in November, but strong lending numbers imply that consumers may be increasingly willing to take on debt in expectations of stronger future economic performance. If such a bullish turn were to occur, markets would certainly view the U.K. economic outlook in a more positive light. Accordingly, analysts will watch for any significant moves in the GfK Consumer Confidence reading.
Previous: Consumer confidence fell to its lowest levels in 36 months, as the U.K. economy grew at its slowest pace in 13 years. The reading itself fell to -9, well below the neutral 0 level, and pointed to a heightened state of consumer pessimism. This, during December, caused many to worry that consumer spending would remain weak during the holiday season. Interestingly, however, yearly retail sales grew an impressive 4.0 percentâ,”above predictions of a 3.7 percent change. Moving forward, few predict any significant rebound in the headline figure, but time will tell if this unexpected increase in retail spending underlines improving consumer confidence.
Canadian Gross Domestic Product (MoM) (NOV) (13:30 GMT; 8:30 EST)
Consensus: 0.2%
Previous: 0.2%
Outlook: Growth in the worldâ,"s eighth-largest economy is expected to have grown another 0.2 percent in November as domestic-based expansion picks up more slack left by a waning export market. Economic expansion in Canada for much of 2004 and 2005 was braced by more and more valuable oil exports. Foreign demand for the precious commodity was so great that not even a currency that appreciated nearly a third against the US dollar from a year prior could moderate it. However, prices for the crude oil and other energy products were continued to contract from their early-September peak in November. This left growth more dependant on domestic factors which were seemingly present. Consumer spending in November was aided by a drop in the unemployment rate to a 30-year low 6.4 percent. The growing number of employed translated to an impressive 1.1 percent rise in sales and helped to boost new vehicles sales 3.1 percent. Housing growth was adding to expansion as housing starts accelerated to 222,100 for the month while new housing prices grew an average 0.5 percent over the same period. Manufacturing provided mixed signals however with a rise in the Ivey purchasing managers index offset by declining manufacturing shipments and industrial product prices.
Previous: Following a month of stagnation, the Canadian economy expanded 0.2 percent in November. The rebound in positive growth was finding more support from domestic factors rather than exports according to the release. Sales by retailers and wholesalers rose 0.9 percent and 1 percent respectively. Combined the two reads comprise nearly 12 percent of the economy. Both types of sellers benefited over the period by declining raw material prices that allowed them to pass on previously incurred input price spikes to consumers in the present month. The industrial sector was also lending a hand to Octoberâ,"s expansion. Manufacturing, partially buoyed by auto companies, expanded 1 percent for the month; while production at factories made a year on year rise of 1.5 percent.
US Consumer Confidence (JAN) (15:00 GMT; 10:00 EST)
Consensus: 105.0
Previous: 103.6
Outlook: Consumer optimism in the worldâ,"s largest economy is expected to improve for the third consecutive month this month suggesting the depression in confidence following the havoc wreaked by Hurricane Katrina is behind most Americans. Januaryâ,"s Conference Board consumer confidence index is expected to rise to 105 from the previous monthâ,"s 103.6 largely due to healthy wage growth and strong job creation. Workers have found more cash in their pockets with earnings rising 3.1 percent in December from the same period the year before. At the same time, the labor market is on track to reveal a strong rebound in non-farm payrolls with initial claims posting at their lowest level in over four years in the week ending January 20th. Other leading confidence indicators are throwing their support behind a rise in the Conference Board index. The ABC News/Washington Post poll rose to its highest level since August, while the University of Michigan measure index improved from December. This confidence indicator will be a key factor in the FOMCâ,"s upcoming meetings. Consumersâ," optimism is a precursor for their spending which accounts for two-thirds of the US economy. Consumer spending slowed to 1.1 percent in the final quarter of 2005, to dampen it to the lowest level since the second quarter of 2001.
Previous: Confidence among US consumers extended its rebound from Octoberâ,"s low by rising to 103.60 in December. The continued improvement in the post-Katrina economy is largely owed to declines in prices at the pump and a resilient labor market. Gas prices for the US consumer were slightly higher in December but still off of September highs. Low heating bills due to a mild winter have also kept consumersâ," cheer high. The component reads of the confidence index, despite the overall improvement, continued to favor Americansâ," perceptions of their current status; while that of the near future waned. The percentage of participants claiming that business were bad declined from 17.9 percent to 14.7 percent, while those claiming jobs are â,"plentifulâ, rose to 23.3 percent from 21.1 percent. Outlook on the other hand was poor. Consumerâ,"s forecasts for the job market six months from December were unchanged while the percentage anticipating their incomes to decline over that period rose.
New Zealand Trade Balance (DEC)(21:45 GMT; 16:45 EST)
Consensus: -$NZ 800 Million
Previous: -$NZ 1,205.3 Million
Outlook: Economists predict that the New Zealand trade balance deficit narrowed from its all-time worst to $NZ 800 million in December. Markets expect that its record-high November deficit will prove unsustainable, and a moderation in imports consumption will produce a stronger result in the following month. Unexpectedly strong domestic spending was in large part responsible for Novemberâ,"s figure, as retail growth numbers pushed 0.9 percent higher versus predictions of a 0.4 percent change. Consumers are no doubt basking in the strength of their national currency, opting to substitute domestic goods with less expensive imports. Exporters, on the other hand, are feeling the pressure as the Kiwi appreciated to a 20-year high against the Australian Dollar in November. The ballooning trade deficit is likely to encourage the Royal Bank of New Zealand to take a dovish stance on national monetary policy. This may not necessarily translate into lower interest rates, however, as strong consumer demand is the main culprit for the widened deficit, and would likely grow further with lower borrowing costs.
Previous: New Zealandâ,"s trade deficit grew to a 12-month record of NZ$6.65 billion in the period ending in November, as sky-high fuel prices and domestic demand drove imports while a strong national currency hurt exports. Slowing international demand for lumber, butter and other exports detracted from overall national growth, as these industries make up 30 percent of the entire economy. Meanwhile, continued strength in domestic spending boosted imports 15 percent on the year. High energy prices had seemingly little effect on overall national demand, as gasoline and jet fuel imports were six times higher than that of a year earlier. Crude oil imports likewise gained a robust 58 percent. Time will tell if the bearish trend in trade balance numbers will translate into future Royal Bank of New Zealand rate cuts, as the central bankâ,"s overnight lending rates are currently the highest of any country with a top credit rating from Moodyâ,"s KMV.
Richard Lee is a Currency Strategist at FXCM.
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