Swiss SVME Purchasing Managers Index (DEC) (08:30 GMT; 03:30 EDT)
Consensus: 65.0
Previous: 67.0
Outlook: Swiss factory growth is expected to have suspended its short-lived rebound in December for a modest contraction to 65.0. While there is increased concern over the health of the economy, economists expect manufacturing to hold out to the end. Supporting this theory is the carry through in consumer confidence and a healthy export market. Exports of Swiss-manufactured goods represent a good portion of the total and this leaves the responsibility for the sectorâ,"s health in good hands given the jump in consumer and business spending in European neighbors like Germany. Domestically, consumer spending has yet to be seriously gouged. Though a number of indicators have suggested the Swiss economy is turning, unemployment remains at lows, encouraging more liberal spending habits. However, while these few factors could help buoy factories in the short-term, the weight of slowing growth and rising interest rates will likely saddle enough weight to put the breaks on manufacturing. Since factory activity is one of the pillars of growth; should it falter, the central bank would find yet another reason to put the stopper in its hawkish rate policy.
Previous: Manufacturing activity unexpectedly rebounded to a three-month high 67.0 according to the SVMEâ,"s PMI. In fact, the breakdown of index into its components suggests the November read was better than Augustâ,"s recent historical high. While output for the month fell short of Augustâ,"s high, the orders backlog reached its own record. This suggests business will follow through in the months ahead. Furthermore, a drop in stocks of finished goods could lead businesses to increase production in order to fill stocks. Aside from traditional production levels, the index revealed a few other interesting trends. A lead in to the inflation, the prices paid component slipped to its lowest level since June, while employment conversely rallied to a new high.
German Unemployment (DEC) (08:55 GMT; 03:55 EDT)
(Change) (Rate)
Consensus: -48K 10.1%
Previous: -86K 10.2%
Outlook: The German labor market is expected to improve once again in December, offering consumers the tools to weather Januaryâ,"s VAT hike. The consensus amongst economists is calling for the ranks of the unemployed to shed 48,000 people, leading the jobless rate to narrow for a fourth consecutive month to 10.1 percent. There are few December indicators that have already been posted; but luckily, nearly every one may help forecast the employment report. From the consumerâ,"s point of view, the GfK confidence read locks in positive expectations. Reaching a five-year high, the sentiment indicator reflects the optimism surrounding the strong pace of economic expansion, but may also reflect a transient improvement in spending ahead of the impending tax hike. Less biased, both investor and business confidence had also improved for the month. The expectations portion of the ZEW investor gauge rebounded strongly from its 13-year lows while the coincident figure pushed to a new record high. More encouraging however was the highest level of confidence among business leaders since the reunification of Germany in 1990. As optimism reaches new highs, the possibility of stronger higher trends grows in tandem. Should German employment move ahead, the ECB policy group will have another indicator to consider when considering rates.
Previous: The levels of the unemployed contracted for the eighth consecutive month in November, sending the jobless rate to its lowest level since December of 2004. These improvements are attributed to a strong economic growth and a very mild winter. Temperatures across Germany from September through November were the warmest since records began in 1901. This has contributed to strong domestic demand, and interestingly enough to another wave of hiring. More influential though is the optimism recent economic strength has lent to hiring managers. With expansion on pace to accelerate to a five-year high, expectations for exports and local spending to sustain the economy through the impending VAT tax hike are high. Despite all this though, a note of caution is still in the air. Even the OECDâ,"s recent 8.7 percent read on employment is still far greater than the USâ,"s 4.6 percent and Japanâ,"s 4.2 percent calculations.
US ISM Manufacturing (DEC) (15:00 GMT; 10:00 EDT)
Consensus: 50.0
Previous: 49.5
Outlook: Markets predict that tomorrowâ,"s ISM Manufacturing report will show a slight improvement on November's result, with a reading of 50.0 reflecting exactly zero change in the sector. Though this will be far from bullish for US industry, two consecutive drops in the headline ISM Manufacturing has many US economic bulls hoping for a mere bottoming out in the significant figure. In order for manufacturing to halt its recent decline, however, demand for manufactured goods will have to make a rebound from broader weakness. In fact, slow demand for US industrial goods has been evident in all major dataâ,”with Ex. Transport Durable Goods orders falling 1.1 percent through November. We look to tomorrowâ,"s data for a clearer picture on US industrial growth, but risks may remain to the downside if we do not see a healthy correction in the ISM Manufacturing New Orders index for December.
Previous: The Institute of Supply Management reported that manufacturing unexpectedly contracted for the first time since 2003. This fell in contrast with similar regional reports, with the Empire State Manufacturing index actually gaining while the Philadelphia Fed survey similarly showed expansion. Regardless, the outlook on the broader national industry seemed consistent across different measures. New Ordersâ,”the bellwether for outlook on manufacturing growthâ,”slowed in both the national ISM figures and the Philadelphia Fed survey. Economists hope to see a recovery in tomorrowâ,"s figures to improve forecasts for broader US economic strength.
John Kicklighter is a Currency Strategist at FXCM.
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