- Japanese Consumer Confidence
- Bank of Japan Monetary Policy Report
- Swiss Consumer Price Index
- Bank Of England Rate Decision
Japanese Consumer Confidence (JAN) (5:00 GMT, 0:00 EST)
Consensus: 48.0
Previous: 46.7
Outlook: Consumer confidence in Japan is expected to bounce back in January to levels similar to those seen in November of last year after taking a short fall in December. General economic sentiment, which acts as one of the four sub-indices of the larger confidence index, should be strong given that Japanâ,"s leading economic indicator has issued readings above 50 for several months in succession. Employment figures, which have perhaps the greatest impact on consumer confidence, should also give a boost to the overall confidence index. In December, the Japanese unemployment rate fell to 4.4 percent from 4.6 percent the previous month. Furthermore, wages in December made their largest gain in a year and a half and the job-to-applicant ratio was at its highest point in 13 years. Given the recent increase in employment, higher wages, and more available jobs, economists predict consumer confidence to reach 48.0 in January.
Previous: In December, confidence among Japanese consumers fell to 46.7, the nationâ,"s lowest point in the final quarter of last year. In surveying only those households with 2 or more family members, the index figure stood at 46.5. In either case, the confidence level was a marked drop from November. Showing greater interest in the overall trend of the fourth quarter, however, economists have expressed relative optimism regarding Japanâ,"s consumer confidence in spite of the recent fall. The end of last year marked the first time in 15 years that Japanâ,"s economy expanded on consumer expenditure as opposed to exports and government spending. It is important to note that as the sub-indices measuring general economic sentiment, estimated income growth, and perception of employment conditions all declined, willingness to spend on durable goods remained constant. This indicates that Japanese consumers were willing to continue spending in December in spite of poor employment and general economic conditions.
BOJ Monthly Monetary Policy Report (6:00 GMT; 1:00 EST)
Consensus: 0.00%
Previous: 0.00%
Outlook: Japanâ,"s central bank is expected to leave its ultra-loose monetary policy untouched for yet another month at its February meeting with its explicit requirements for considering a shift still unmet. Policy makers have, in the past, laid out three clear prerequisites that must occur before a change in scope can be considered. The first of these rules has already been achieved- sustainable economic growth. The worldâ,"s second largest economy has reported 5.0 percent or greater growth for the first half of the 2005, but slowed considerably in the three months ending in September to an annual 1.0 percent. However, the consensus for growth in the final three months of the year puts it back on track with a strong return of 4.9 percent. Problems arise from the second and third conditions - that core inflation stops declining and will remain positive for the foreseeable future. Prices for core consumer goods rose for the second consecutive month in December for the first back-to-back rise since April of 1998. While this is far from a trend, bank officials will increasingly look to other factors to provide a clearer picture ahead of actually inflation figures. Key amongst the slew of indicators will be consumer confidence, household spending and other related numbers. Consumer confidence fell to a four month low in December, but other indicators contradict this negative turn in sentiment. Unemployment pared back to 4.4 percent, wage growth jumped 1.6 percent and house-hold spending hit a 20-month high 3.2 percent all in December. As sustainable approaches speculation of a hike has increased exponentially, but a strong group of detractors in the government will continue to press their influence.
Swiss Consumer Prices Index (JAN) (6:45 GMT; 1:45 EST)
(MoM) (YoY)
Consensus: -0.2% 1.4%
Previous: -0.1% 1.0%
Outlook: Inflation in Switzerland is expected to once again print a split change in the two commonly measured periods. Expectations of a 0.2 percent contraction in consumer prices from the month before are counteracted by a forecasted 1.4 percent increase from January 2005. Leading the supposed advance in prices was the resumption of appreciating energy product prices. Volatile crude oil prices in January approached levels just short of all-time highs set in late August. Oilâ,"s affect is unlikely to show an immediate effect on consumer prices however. Instead, the pass-through of the additional costs will likely be more general as companies asses the reemerging burden. On the other hand, prices of natural gas over the same period plunged to a six-month low, which should produce a more immediate reaction to consumerâ,"s as their heating bills notch lower. Price growth for the period will also be stoked by healthy demand for Swiss products from trade partners. Germany, Switzerlandâ,"s largest export market, reported its highest business confidence in five years in January suggesting investment by companies will translate into higher demand and prices for Swiss goods.
Previous: Price growth in Swiss consumer goods for the month of December reported a repeat 1.0 percent - half of the Swiss National Bankâ,"s 2.0 percent bound. Many economists and officials outside of the SNBâ,"s policy board believe this tame rate of inflation will provide scope to slowly remove the central bankâ,"s accommodative tone. While the December release came in slightly below expectations of 1.1 percent on the annual measure, the monthly gauge revealed its second consecutive decline of 0.1 percent following Octoberâ,"s 0.3 percent drop. The decline over the shorter period was the result of a 2.5 percent decline in the cost of oil products, specifically an 11 percent contraction in crude oil prices from Augustâ,"s historical high. These figures play well into SNB President Jean-Pierre Rothâ,"s comments made on December 15th following his decision to increase the overnight lending rate for the first time in a year. Roth said that while inflation is currently under control, the bank would continue to act â,"[preventively] as economic recovery progresses.â,
Bank of England Interest Rate (12:00 GMT, 7:00 EST)
Consensus: 4.50%
Previous: 4.50%
Outlook: On February 9, 2006, the Bank of England (BoE) will make its decision regarding the benchmark lending rate. According to a survey of economists, the BoEâ,"s Monetary Policy Committee will keep interest rates at 4.50%. Policy-makers have expressed their confidence in economic growth, which, coupled with low inflationary pressure is likely to move the committee to maintain current rates. The U.Kâ,"s GDP growth rate began to pick up in the fourth quarter of last year and is expected to register at 2.5 percent in 2006â,”a much stronger figure than the 1.8 percent growth experienced in 2005. After a sharp slowdown in early 2005, retail sales climbed for the fifth straight month in December, indicating that growth on the helms of consumer expenditure is probable. Additionally, mortgage approvals towards the end of last year were at a 21-month high and housing prices have increased 1.4 percent in the past month. This housing data points to further inclination towards increased spending. In the midst of all this growth, consumer price inflation is expected to remain below the targeted 2 percent in 2006 as relatively high unemployment holds prices down. Higher transportation costs in recent months, however, indicate that some inflationary pressure may result from growing fuel costs. If a second round of overall higher prices results from steep fuel costs, inflation may not remain in the range necessary to keep interest rates at their current position. Furthermore, if growth does not meet expectations, the BoE may have reason to reconsider rates later in the year.
Richard Lee is a Currency Strategist at FXCM.
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