Japanese Industrial Production (SEP P) (23:50 GMT; 18:50 EDT)
(MoM) (YoY)
Consensus: -0.9% 4.9%
Previous: 1.8% 5.9%
Outlook: Japanese industrial production could correct lower in September, following August’s jump of 1.8 percent. Estimates have been pinned at -0.9 percent, and while that would mark a sharp decline, the annual rate would still hold at a solid 4.9 percent and by no-means would signify a reversal for the manufacturing sector. Business confidence in Japan, as measured by the Tankan survey, hit a two-year high for the third quarter on increased profit expectations. The improved sentiment bodes well for capital expenditures, which have kept the Japanese economy on track for continued growth. However, fears of economic slowdown in the US and the subsequent drop in demand for Japanese products that would result could keep traders on edge this month and in the months going forward.
Previous: Industrial production in Japan during the month of August jumped 1.8 percent, pushing the annual rate to a two-year high of 5.9 percent. Auto companies and chipmakers led the rise as companies increased output to meet surging global and domestic demand. Toyota Motor Corp., the world's largest automaker by value, said that it stepped up production after automobile exports to the US rose at the fastest pace in almost a decade during August. This very jump in demand for Japanese products could pose a risk, though, as a marked slowdown abroad would lead to a massive accumulation of inventory. However, the Bank of Japan remained optimistic, as the production report backed the central bank’s outlook, and should keep Governor Toshihiko Fukui and his fellow decision-makers on track to raise borrowing costs, as long as prices keep rising and the economy expands.
New Zealand NBNZ Business Confidence (OCT) (12:00 GMT; 07:00 EST)
Consensus: n/a
Previous: -28.9
Outlook: Though there is no official consensus for New Zealand’s business sentiment indicator for October, there are a number of data releases that could clear the picture. There were a number of related releases that are likely to be reflected in business leaders’ confidence levels. Adding to a potential boost in greater optimism over the period were indicators of growing consumer confidence, an improving trade account and a firm confidence report. As the bank’s released their third quarter figures, confidence numbers were among the most interesting for companies. Westpac’s consumer indicator jumped from 106.0 to 111.7; while the NZIER Business Opinion Survey through the quarter rose from negative 44 to negative 19, its highest reading since the fourth quarter of 2004. Contradicting these numbers however, the lagging second quarter GDP number reported a faster than expected contraction of 0.5 percent growth from 0.8 percent in the first three months of the year. Elsewhere, an ANZ PMI read fell to its lowest level since January, indicating the lack of optimism in the manufacturing sector; while demand softened with retail sales unchanged over the month of August. If business optimism starts to falter, the last threads of hope for a rate hike could be severed.
Previous: The National Bank of New Zealand’s business confidence indicator grew to its highest level in 18 months in September as falling energy costs and steady consumer spending facilitated a more optimistic disposition. Crude oil prices dropped from their record highs in the previous months to nearly $60 per barrel on the global market. Following suit, gasoline prices dropped 10 percent during this same time period, providing a greater pool of disposable income amongst consumers. Both of these factors led the percentage of respondents to the survey expecting business to improve over the coming 12 months to grow to 33 percent, while those expecting it to slow fell to 18 percent. Also noteworthy from the breakdown, inflation expectations ticked lower to 3.4 percent, leading 34 percent of businesses to expecting to raise prices in the coming three months from 41 percent in August.
US Personal Spending (SEP) (13:30 GMT; 08:30 EST)
Consensus: 0.3%
Previous: 0.1%
Outlook: Consumer spending in the US is anticipated to pick up in September, as falling crude oil brought gasoline prices to six month lows. Analyst estimates have been posted at 0.3 percent, and the rise would be in line with retail sales, which accounts for almost half of all consumer spending. The sales figure, excluding service station purchases, gained 0.6 percent in September. Also boding well for the personal spending report was the most recent disposable income figure, which increased 0.4 percent. Consumption may only continue to mount for so long, however, as oil prices are likely to rise due to OPEC cuts in production, and falling housing prices will leave homeowners with less equity to draw credit on.
Previous: Personal spending in the month of August rose a paltry 0.1 percent following a 0.8 percent gain during the month prior. Consumers found it harder to tap the equity in their homes, a major source of cash in recent years, as the property market cooled. Dollar bulls were likely hoping that income growth, which rose 0.3 percent in August, combined with the recent drop in gasoline prices, could prevent spending from sliding and subsequently ensuring the economy survives the housing slump. While consumption is anticipated to slip compared to the rapid growth seen in previous months, buoyant sentiment reports may indicate that consumers are far more resilient than analysts expect.
US Core Personal Consumption Expenditure (SEP) (08:30 GMT; 13:30 EST)
(MoM) (YoY)
Consensus: 0.2% 2.4%
Previous: 0.2% 2.5%
Outlook: The Federal Reserve’s favored gauge of inflation, the Personal Consumption Expenditure indicator, for September is expected to maintain its monthly pace. Except for July’s brief dip, inflation has measured 0.2 percent growth in every month this year. Aside from this though, the more important forecast comes on the annual figure slowing to a 2.4 percent from a 2.5 percent pace, which matched the fastest tempo since January of 1995. Predictions for this period’s PCE number come on the behalf of a few previously released price gauges. Just recently, the quarterly core PCE read, actually encompassing the month of September, slowed to 2.3 percent from 2.7 percent over the second quarter. On the other hand, the consumer price indicator specifically for the month of September actually expanded. Core CPI accelerated to a decade-high, 2.5 percent as housing costs continued to process the previous months’ higher energy numbers. If the PCE indicator starts to trend lower, it would effectively counter the hawkish stance the market has taken on inflation using the core CPI read.
Previous: Inflation amongst the goods that consumers most frequently buy grew 0.2 percent over the month, pushing the annual gauge to a recent record high 2.5 percent. The personal consumption expenditure indicator grew 2.5 percent in the year through August, the biggest jump in prices in over ten years. The increase in core prices comes as a consistent pass through in energy prices that have risen to record highs over multiple months in the recent past. Another push on the price envelope comes from consumer side. Though spending for the same month eased to 0.1 percent growth, the slowest since November; ever growing wages encourage consumers to push inflation through demand. At such a rapid pace of price growth however, the policy problems have caught the attention of the Fed Board of Governors. Though the FOMC decided to keep the overnight lending rate unchanged in August, they still issued a warning of price risk related to the high level of the inflation gauges. In fact, Governor Bernanke and a few other prominent members of the group said their comfortable level of price growth was between 1 and 2 percent according to the PCE measurement, a ways from recent reports.
Richard Lee is a Currency Strategist at FXCM.