German GfK Consumer Confidence (OCT) (06:10GMT; 02:10EST)
Consensus:     8.7
Previous:         8.6

Outlook: October Consumer Confidence in Germany, as measured by the GFK survey, may peak at 8.7 in line with current assessment readings from both ZEW and IFO. Substantial downside risk for the October reading, as well as figures for coming months may come amid increasing uncertainty over the future outlook of Europe’s largest economy. Sluggish spending has been a major problem as consumers’ concerns about the employment atmosphere have recently been made manifest as wage growth has been unable to keep pace with rising prices. Consumers could now be considering the outlook for the economy in a more pessimistic light than in the prior month as marked by disappointing IFO Business Climate numbers and an impending increase in value-added tax paid by consumers to 19 percent from 16 percent.

Previous: GfK’s forward-looking German consumer climate indicator for September edged up to 8.6 from a revised 8.5 in August as confidence has held steady in light of relatively stable and healthy business and investor sentiment. With an impending 3 percent VAT hike, consumers are likely to boost sales in upcoming periods before the increase occurs to take advantage of current price levels and, as such, possibly distort sentiment data as any long term change in demand is unlikely to be material. However, recent tightening of interest rates look to hurt business confidence and will likely have a negative effect on consumers in the near-term as any slowdown in the business sector will adversely effect employment and ultimately lessen demand as wage growth continues to lose pace with rising prices.

Swiss KOF Manufacturing (SEP) (09:30GMT; 05:30EST)
Consensus:           2.45
Previous:               2.42

Outlook: The KOF Swiss leading indicator for September is expected to rise slightly to a 2.45 reading after August's drop to 2.42. Despite the softer readings recently, the indicator is still at a healthy level and points to continued robust Swiss growth and, as such, the SNB is likely to continue monetary tightening into 2007. The labor market also remains firm as inflation has so far remained under control and CPI failing to show signs of a rapid pick-up and has hence allowed the SNB to gradually hike rates as a factor of continued growth instead of risking a possible economic slowdown.

Previous: The August KOF leading indicator fell slightly back to 2.42 as it has ultimately continued an upward march the back of rising business investment and private consumption. August PMI surprisingly rose to 68.2 from 65.1 in July to currently sit at a six year high as foreign demand and investment continues to bolster the economy. The UBS July consumption indicator slipped to 1.881, however, the figure remains above the May reading and should still be viewed as robust, despite the decline from June which was a 6 year high. Furthermore, the UBS data highlighted the strong consumption signals of the KOF figure.

UK CBI Distributive Trades (SEP) (10:00GMT; 06:00EST)
Consensus:          10
Previous:              12

Outlook: A slight decline in the CBI headline index for September to 10 is expected as August’s surprisingly strong numbers are likely to be corrected. UK retail sales have picked up this year and should see continued healthy gains as a gradual firming of the labor market and a surprisingly resilient housing market should support increased consumer spending. Although higher prices via rising utility bills continue to weigh on households, strong consumer demand and a growing employment environment should balance out and continue to bolster retail sales.

Previous: U.K CBI in August rose to 12 as retail sales showed similar improvements and posted in line with expectations at 0.3 percent, while the annual rate remained stable at 4.3 percent. August BRC same store retail sales growth slowed, however, to 2.5 percent on the year from 3.4 percent in July. Nevertheless, the August CBI increase bodes well for consumer spending in Q3 as the retail sector recovery trend is still in place and further improvements in the second half of 2006 may become apparent.

US Durable Goods (AUG) (12:30GMT; 08:30EST)
                      (Headline)     (ex Transportation)
Consensus:         0.5%                 0.5%
Previous:            -2.4%                 0.5%

Outlook: The usually volatile measure of US durable goods is predicted to increase a modest 0.5 percent for the month of August.  While this consensus is somewhat down the center, the potential for a large shift either way exists.  Supporting those positive expectations were related sales data and other extracurricular events.  Perhaps the most objective proponent for strength in goods orders was the retail sales number for the same month.  Sales advanced a modest 0.2 percent in August, while purchases of new autos specifically grew 0.4 percent.  Another big factor for orders likely came from the drop in energy prices.  With crude oil prices in the beginning stages of what evolved into a sharp 25 percent decline, firms likely found an impetus to increase investment in aged equipment.  Despite these improvements however, there are a number of indicators that suggest otherwise.  For the most part, the detractors lay in manufacturing activity figures.  In August, industrial production fell for the first time since January, the ISM manufacturing read dipped and the regional Philadelphia Fed survey contracted for the first time since April of 2003.  Leading in directly to this month’s durables read however may be the drop in commercial airplane orders, from 38 to 30, for Boeing.   

Previous: While the headline read of durable goods orders fell more than expected in the month of July, the less volatile calculation that excludes transportation equipment was actually able to produce a positive read.  Orders dropped 2.4 percent over the month of July, the biggest slide since April, as demand for automobiles and commercial aircraft contracted.  In fact, car orders dropped 7 percent as dealers had trouble moving existing inventory due to historically high gasoline prices.  More damaging to the overall number was the 10 percent plunge in commercial aircraft numbers.  The US’ largest commercial plane maker, Boeing, reported only 38 new orders for the month, compared to 135 the month before.  When the transportation component was stripped out of the read, the gauge was actually able to climb 0.5 percent.  The categories that advanced, suggested improvements were underway in the corporate sector.  Firms helped to tally up a 4.6 percent increase in computer and electronic sales and 1.9 percent growth in machinery.  Orders for non-defense goods that excluded aircraft, often used as an indication of future investment, grew 1.5 percent in July.

US New Home Sales (AUG) (14:00GMT; 10:00EST)
                         (Sales)        (Change)
Consensus:       1,040K          -3.0%
Previous:           1,072K          -4.3%

Outlook: Sales of newly built homes are expected to drop for the fourth consecutive month in August to 1.04 million units annually.  There is more than enough support for such a downturn coming from the general declining trend in the housing market and more specifically from other periphery indicators.  Perhaps the most influential input for those predicting the new home sales figure comes from the existing unit sales number which just recently dropped 0.5 percent to 6.3 million units, the slowest pace since the first half of 2004.  What’s more, prices for existing homes declined 1.7 percent on an annual basis for the first time since 1995 and singularly the second largest drop on record.   Moreover, starts dropped 6 percent to a 3 year low, while permits contracted for the seventh consecutive month to their own four year low.  While sales of newly constructed residences accounts for only 15 percent of the total market, it is also considered a leading indicator amongst the number of releases available on the topic.  Should this release decline as expected, or at a faster than predicted clip, many forecasts for a rebound in the housing market will be seen as hopeful and consumer spending could quickly drop off the map.

Previous: New home sales dropped a greater than expected 4.3 percent in the month of July to 1.072 million units as a general decline in the market leaves potential buyers out of the market.  Affordability in home ownership has declined dramatically over the past year as a steady two-year cycle of the Fed hiking overnight cash rates have buoyed mortgage rates in turn.  The trend is so prominent that sales have dropped 22 percent from the same month a year ago, while inventories of new homes have breeched new records.  Since the bulk of the typical American’s wealth is tied up in housing, the steady decline in housing trends is expected consistently erode spending habits in the months ahead.

Richard Lee is a Currency Strategist at FXCM.