- Germany’s Gfk Consumer Climate Index to hold steady at a relatively high level
- Today’s US Services PMI offers another look at the US macro profile for October
- New home sales in the US in September could ease for a second month
Germany’s economy is in focus again today with the release of the November estimate of the Gfk Consumer Climate Index.
Later, two US reports will receive attention ahead of Friday’s first look at third-quarter GDP data. Meantime, keep your eyes on today’s numbers for the Services PMI in October and new home sales for September.
Germany: Gfk Consumer Climate Index (0600 GMT): Business sentiment in Europe’s biggest economy posted a modest improvement in October, according to yesterday’s Ifo data. Will consumer sentiment survey also post a firmer reading in today’s update from Gfk?
The upbeat profile in the corporate realm offers a degree of optimism for thinking positively.
“Companies were more satisfied with their current business situation,”
said the president of the Ifo Institute.
“They also expressed far greater optimism about the months ahead. The upturn in the German economy is gathering impetus.”
The Ifo news follows Monday’s upbeat results for the Germany PMI Composite Output Index, which ticked up to a three-month high for October’s flash estimate.
The advance from September’s 16-month signals “an acceleration in the rate of growth” for Germany, IHS Markit advised.
Will today’s release bring a third round of positive numbers? The crowd has mixed expectations.
Econoday.com’s consensus forecast sees the Consumer Climate Index (CCI) as unchanged at 10 for what’s billed as the projected reading for November. But that’s hardly a tragedy.
Indeed, if CCI holds steady, the index will remain close to its highest level in over a decade. That’s a touch weaker than we’ve seen in recent months, but a relatively high and steady sentiment profile for consumers, coupled with modestly bullish data for the business sector, suggests that Germany’s economy is on track to post moderate growth in the fourth quarter.
In other words, the initial worries about a Brexit blowback in the summer continue to fade.
US: PMI Services Index (1345 GMT) The PMI data for September reflect sluggish growth for the services sector. According to IHS Markit, last month’s 51.9 reading indicates economic growth for the US at an annual rate of just 1%.
But the competing ISM Non-Manufacturing Index for September paints a substantially brighter profile. Indeed, the ISM benchmark for services surged to just over 57 last month – the highest level in nearly a year.
Adding to the case that the September PMI report understates the economy’s strength is the relatively upbeat estimates for third quarter growth.
The Wall Street Journal’s latest survey of economists shows an average forecast of 2.6% for this Friday’s “advance” Q3 GDP report. If the prediction holds, quarterly output is set to grow at the fastest rate in over a year.
But the sharper-than-expected drop in consumer confidence could be a joker in the deck. The Conference Board’s (CB) index of the mood fell to a three month low this month.
“Consumer confidence retreated in October, after back-to-back monthly gains,”
said CB’s director of economic indicators.
“Consumers’ assessment of current business and employment conditions softened, while optimism regarding the short-term outlook retreated somewhat."
She noted, however, that even after the latest setback, the index continues to align with expectations for moderate economic growth in the near term.
Given what we already know about the economy, today’s PMI data for October will probably tick higher and reaffirm the widely held view that the economy will continue expanding in the fourth quarter.
US: New Home Sales (1400 GMT): Existing home sales in September bounced back after declines in the previous two months. Is that a sign that today’s update on newly built homes is headed for a rebound too?
It’s tempting to think so. The solid improvement in purchases for existing inventory was powered by demand from first-time buyers, a group that accounted for 34% of sales – a four-year high, according to the National Association of Realtors.
But today’s update on the appetite for newly-built houses is expected to slide for a second month in a row. Econoday.com’s consensus forecast sees sales edging lower in September to 601,000 units (annualised rate), a three-month low.
Yet inventory “remains exceptionally tight”, the economics team at Wells Fargo wrote last week:
“We continue to look for a gradual improvement in home-building, although residential investment will likely drag on Q3 GDP despite improving activity in September.”
A sharper slide in sales activity in today’s release would trim the outlook at bit, but for the moment the near-term prospects for a housing recovery remain in place.
“Underlying demand for housing remains strong – driven by solid job gains, accelerating wages, rising household formations and near record-low mortgage rates,” the chief economist at Nationwide Insurance recently advised.
Disclosure: Originally published at Saxo Bank TradingFloor.com