- Will Germany’s exports suffer amid global slowdown?
- The crowd expects another upbeat US jobless claims report
- US Consumer Comfort Index may help sort out mixed sentiment data
The potential for a stumble in Germany’s export machine is in focus today, with the release of the country’s merchandise trade report for August. Later, two US numbers will offer new perspectives on the outlook for the macro trend in the world’s biggest economy.
Germany: Merchandise Trade (0600 GMT): This week’s disappointing updates on factory orders and industrial production have fanned the flames of worry over the potential for blow-back in Germany's economy. The critical factor is the slowdown in China and other key emerging markets, a dip that's expected to take a toll on the export machine in Europe’s largest economy.
ING economist Carsten Brzeski told Reuters yesterday that the soft data for output and new orders will stoke questions about Germany’s vulnerability at a time of weaker global growth. "German industry is still struggling to gain momentum,” he said. Why? Sluggish growth on the world stage. Earlier this week reports from Markit Economics and Fulcrum Asset Management advised that global output continued to slow through September.
Today’s report on Germany’s foreign trade data for August will provide fresh numbers for evaluating the trend. In year-over-year terms, exports and imports have been relatively steady, posting healthy gains in recent months. But the emissions scandal at Volkswagen (XETRA:VOWG) (OTC:VLKPY) is expected to weigh on economic activity in the months ahead, casting yet another negative factor over the near-term outlook.
Germany’s export market has been quite resilient in recent years. Today’s release will provide a new test for deciding if the upbeat trend will remain resistant to rising domestic and foreign hazards on the horizon.
US: Initial Jobless Claims (1230 GMT): Last week’s surprisingly weak jobs report for September has cast a dark cloud over the outlook for the US economy, although the upbeat numbers for jobless claims suggest that the payrolls data will perk up in the months ahead.
New filings for unemployment benefits rose again last week, but claims are still trending down when viewed across the last 12 months. As you can see in the chart below, the linear trend line for the weekly data, which can be quite volatile in the short run, is still falling.
Today’s update is expected to deliver more support for anticipating that the labour market will continue to grow. Econoday.com’s consensus forecast sees claims falling 5,000 to a seasonally adjusted 272,000. That’s close enough to the recent four-decade low of 255,000 to inspire forecasts of a rebound in payrolls in October.
On the other hand, a surprisingly hefty rise in today’s data would be seen as confirmation that the recent run of soft macro data is a genuine warning sign for the US. That’s considered a low-probability outcome at this point. But if the crowd’s wrong, market sentiment will suffer.
US: Bloomberg Consumer Comfort Index (1345 GMT): Recent updates of consumer sentiment have been a mixed bag of numbers, ranging from mild warnings to relatively upbeat estimates of the current mood on Main Street.
On the bright side is the Conference Board’s September report of the Consumer Confidence Index, which increased last month, building on August’s sharp gain. “Consumers’ more positive assessment of current conditions fueled this month’s increase, and drove the Present Situation Index to an eight-year high,” said the group’s director or economic indicators.
The trend was considerably weaker via the University of Michigan’s widely followed Consumer Sentiment Index, which dipped to an 11-month low in September. “Recent events have been viewed as negative economic indicators by consumers, including falling commodity prices, weakened Chinese and other economies as well as continued stresses on European countries,” noted the chief economist who oversees the numbers.
An even darker view emerges in Gallup’s US Economic Confidence Index, which has been sliding for most the year so far, although the September reading was only slightly lower compared with the previous month.
So, which index should we believe? Maybe today’s weekly release of the Consumer Comfort Index can sort out the trend. Recent updates show a solid improvement in this measure of the mood, with the CCI rising to its highest level since July for the week through September 27. Another rise in today’s update will give optimism another boost while raising doubts about the legitimacy of the weaker data points from other sources.
Disclosure: Originally published at Saxo Bank TradingFloor.com