Japanese Retail Trade (SEP) (23:50 GMT; 19:50 EST)
(MoM) (YoY)
Consensus: -0.7% 1.2%
Previous: 1.7% 1.1%
Outlook: Retail sales in the worldâ,"s second largest economy are expected to have dropped 0.7 percent over the month of September. From the myriad of indicators gauging the health of the consumer, and therefore their spending habits, the reasoning behind the contraction in sales becomes clear. Though the most recent indicator of joblessness held at 4.1 percent in August, only 0.1 percent above the recent record low, consumers have yet to turn this situation into greater optimism. In fact, consumer confidence in September dropped to its lowest level in a year as slow wage growth and persistently high gasoline prices curbed enthusiasm. This is further weighed down by a trend of poor spending habits that was last indicated by the household consumption indicator dropping 4.3 percent in August. Perhaps the most useful reports towards forecasting the retail number however are other spending indicators. Car sales on an annual pace dropped 7.4 percent in September. Elsewhere, convenience store sales dropped 3.6 percent while chain store sales dropped 1.9 percent. If the consumer does not begin to produce a greater contribution to growth in the months ahead, the rates of expansion and inflation may not warrant another hike from the BoJ.
Previous: Retail sales grew faster than expected in August on the back of higher gasoline prices. For the month, sales grew 1.7 percent while marking a 1.1 percent pace of expansion through the year. The rebound in spending after two monthâ,"s of contractions led the market to believe that strong employment trends may actually register with slow to adjust consumer confidence and spending. The jobless rate over the month slipped held just above the eight-year low printed earlier in the year at 4.2 percent. Furthermore, the job-to-applicant ratio rose to a 14 year high, indicating there are plenty of jobs for those that are looking. On the other hand, this strength in employment may not be enough to support the dearly needed wage growth. Wages have grown consistently since January, but gasoline at a 16 year high 144 yen per liter and a new rate hike absorb more of the disposable income available.
Swiss KOF Leading Indicator (OCT) (09:30 GMT; 04:30 EST)
Consensus: 2.24
Previous: 2.32
Outlook: The KOF Leading Indicators Index, used to predict growth in the coming six to nine months, is expected to slow for the third consecutive month in October. Economists expect the forward-looking indicator to fall 8 points to 2.24, which would be the lowest print since the April figure and a substantial distance from the six-year high set in July. Despite these predictions however, nearly every one of the economic releases hitting the wires since last monthâ,"s KOF report have supporting stronger growth in the months ahead. Swiss consumers increased their spending habits in September as the unemployment rate slipped to match its lowest level since December of 2002. Consumption, in turn, rose as indicated by UBSâ," indicator; and is further backed by Augustâ,"s 4.5 percent jump in retail sales. Trade may also play into a stronger numbers, as last monthâ,"s balance marked is biggest surplus on record at SFr 1.83 billion. However, the manufacturing sector may prove anchor to growth. While the trade balance grew, exports actually lagged as European demand begins to slow in anticipation of Germanyâ,"s VAT tax hike. Furthermore, the SVME PMI was the only indicator since the last KOF read to report a negative change. If this economic growth indicator continues to under perform, the SNB will have plenty of time to rethink its steady pace of quarterly rate hikes.
Previous: The Swiss Leading Indicators composite for the month of September fell by more than expected in as a decline in exports looked to trim GDP potential. The indicator used to forecast growth in the coming months shed 12 points to 2.32 from August. From the number of indicators that were used to determine the overall read, many were suffering corrections from growth trends that held through the first half of the year. Specifically taxing on this monthâ,"s figure however was weak demand from outside Switzerlandâ,"s borders. Exports account for almost 50 percent of the nationâ,"s $368 billion economy. This means the 1.7 percent drop in shipments abroad from July to August played a significant hand in pulling the KOF lower.
US Annualized Gross Domestic Product (3Q) (12:30 GMT; 08:30 EST)
(GDP) (GDP Price Index)
Consensus: 2.1% 2.9%
Previous: 2.6% 3.3%
Outlook: US GDP growth is expected to slow for the second month in a row as a weaker housing market and higher oil prices hit the economy. Auto sales are predicted to have played a major role in the weakness along with residential investment spending. Consumer spending should hold up pretty well, but this may be overlooked by traders who project weakness going forward given Thursdayâ,"s surprising drop in durable goods ex transportation, house prices and rise in oil prices. The GDP price index is expected to fall, but the number to watch will be the Core PCE. Given the recent jump in annualized core consumer prices, an upside surprise in core PCE could offset any pessimism stemming from disappointments elsewhere in the report.
Previous: US GDP growth slowed to 2.9 percent in the second quarterâ,”a considerable decline from the 5.6 percent pace seen in the first quarter of the year. Indeed, economists cited building inventories and lower demand for the progressive slowing of broader expansion, and likewise called for GDP to fall below trend through the remainder of the year. Leading the slowdown was a soured housing market, with home construction 9.8 percent lower in the same periodâ,”the largest decline since 1995. Markets will look to tomorrowâ,"s report to see if this trend can reverse, improving outlook on the worldâ,"s largest economy.
Richard Lee is a Currency Strategist at FXCM.
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