- Australian Retail Sales
- University Of Michigan Consumer Confidence
- U.S. Factory Orders
- ISM Non-Manufacturing Survey
Australian Retail Sales (DEC) (0:30 GMT; 19:30 EST)
Consensus: 0.5%
Previous: -0.1%
Outlook: An increase of 0.5% is estimated in Australiaâ,"s December retail sales figure, receiving a boost from Christmas spending. Harvey Norman, the countryâ,"s largest furniture and electronics retailer, has seen a 10.7% increase in sales and the nationâ,"s biggest grocery store chain, Woolworths, has seen sales more than double. Sustained consumer spending, which accounts for a large portion of the economy, is just what Australia needs after sluggish GDP growth in early 2005. A 1.5% decline in gasoline prices from November to December may contribute to increased expenditure as consumers were left with more to spend. The Reserve Bank of Australia, however, may not be so quick to tighten monetary policy after Decemberâ,"s predicted retail growth. Instead, the central bank may keep in mind the softening of sales in November and wait for evidence of more sustained growth before increasing interest rates.
Previous: Retail sales saw a retraction of 0.1% in November as high energy costs over the past year have dampened consumersâ," enthusiasm to spend. The retraction came after a 0.5% increase in sales in October. In order to cut costs in the face of rising energy prices, Australian companies have reduced employment. As a result, the Australian unemployment rate hit its high in October and stayed high for the remainder of the year. The consumer populace, therefore, has had less spending power, which is reflected in Novemberâ,"s declining retail sales. Furthermore, a softening housing market has prompted consumers to tighten their pockets as they see their extra expendable income from real estate investments decline. From a retailer-specific standpoint, sales at clothing stores fell 1.5% on the month and sales at supermarkets decreased 0.7%.
University of Michigan Confidence (JAN F) (14:45 GMT; 9:45 EST)
Consensus: 93.4
Previous: 91.5
Outlook: Consumer confidence as measured by the University of Michiganâ,"s confidence index is expected to rise for the third consecutive month in January. A predicted reading of 93.4 is in line with preliminary estimates and shows consumer confidence to be at its highest since pre-Katrina levels in the summer of 2005. First-time claims for unemployment benefits fell to a five-year low, evidencing a strong labor marketâ,”the most significant factor contributing to consumer sentiment. Higher employment gives consumers a greater sense of security and encourages them to spend. Furthermore, a relief in fuel prices has made Americans feel much better about their personal financial situations. Weak consumer sentiment in the latter half of 2005 resulted in 10-year lows in spending. An optimistic upturn implies spending patterns that will drive greater GDP growth in the first quarter as compared to the final quarter of last year.
Previous: UMichâ,"s confidence indicator registered a reading of 91.5 in December, bringing U.S. consumer confidence to its highest level since July. Consumersâ," confidence was boosted by a 30% drop in gasoline prices from post-Katrina highs. Additionally, consumer sentiment may have risen on a strong stock market as the S&P500 index experienced a 5% gain on the month. The high level of consumer optimism was a positive sign for consumption, which accounts for 70% of the U.S. economy. Recognizing the positive impact consumer optimism would have on spending, the Federal Reserve Bank continued with their program of interest rate tightening in mid-December, displaying confidence in the nationâ,"s economic growth.
U.S. Factory Orders (DEC) (15:00 GMT; 10:00 EST)
Consensus: 1.1%
Previous: 2.5%
Outlook: The Commerce Departmentâ,"s report on factory orders is expected to show the third consecutive month growth in December. Expectations of a 1.1 percent increase in bookings at factories are consistent with a decline in durable goods orders. The durable goods measure slowed to 1.3 percent over the same period with an increase in demand for business equipment offsetting declines in orders for aircraft and consumer spending. After a huge jump in aircraft orders in the previous month, bookings contracted 8.1 percent in December. The slowdown in consumer spending however holds the most potential for damaging the economy. Once the engine behind economic growth in the US economy, consumer spending on an annual basis grew only 0.4 percent in December - its slowest pace in nearly 14 years. Some officials however say that where consumer spending will weaken, business investment will pick up the slack as they look to improve efficiency and expand capacity limits. This may already have been evident in December with machinery orders increasing 6.5 percent.
Previous: New Orders at factories met forecasts of a 2.5 percent rise over October as a slowdown in demand for cars and business equipment were overshadowed by increased bookings for aircraft. A 16 percent rise in transportation equipment was headed by a 52 percent jump in commercial aircraft orders. The effect this specific component had on the entire factory ordersâ," read is apparent when excluding its weight leaves the overall indicator unchanged for the second month in row. The biggest detractor from orders for the period came from a 7.8 percent decline in car and parts orders and specifically an 11.4 percent decline for autos. Diminishing investment from companies in the face of slower consumer spending was also a drag on future factory business.
U.S. ISM Non-Manufacturing (JAN) (15:00 GMT; 10:00 EST)
Consensus: 60.0
Previous: 61.0
Outlook: Business activity in the services industry is expected to have contracted slightly last month. A consensus for a 60 read for January suggests the post-holiday decline in spending for services will draw on managersâ," perceptions. However, the same underlying components that helped to spur growth in December have shown better results in January than the month before. Consumersâ," spending on services could benefit for the period after preliminary employment data has shown encouraging numbers. Both initial and continuing claims fell to lows not seen in over a year. Continuing claims for the week ending January 6th slowed to 2.528 million while initial claims fell to 272,000 for the second week of January. Furthermore, this strength in employment has already translated to a boost in consumersâ," optimism. According to Tuesdayâ,"s Conference Board measure, consumersâ," confidence rose to a three-year high 106.3 bolstered chiefly on the buoyant labor market. Services will be one of the key ingredients for growth in the opening quarter of the year. Economic expansion for the final three months of 2005 slowed drastically to 1.1 percent, cooling growth that had consistently reported above 3 percent.
Previous: The services sector grew at its fastest pace in four months in December according to the Institute of Supply Managersâ," measure. Service-based industries for the final month of the year received much of its strength from increased wages and a strengthening job market that encouraged consumers to part with their dollars more freely. The unemployment rate for the month dropped to a four-year low 4.9 percent, while wages for the same period rose 0.3 percent from November. Consequentially, consumersâ," optimism rose to a pre-Katrina, four-month high 103.8 according to the Conference Boardâ,"s measure. Of the seventeen industries tracked by the indicator; eleven reported growth with retailing, business services, entertainment and banking leading the way. Retail sales in December grew 0.7 percent from the previous month. Delving further into the components of the index; employment, prices paid and new orders had all shown improvement from November. The index of new orders rose from 59.5 to 61.9 while the index for prices paid for intermediate materials and services fell from 74.2 to 68.5.
Richard Lee is a Currency Strategist at FXCM.
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