Tuesday’s a busy day for economic reports, including third-quarter GDP revisions for the US and Germany – numbers that will dominate the news cycle today. Meantime, we’ll also see several other releases that will offer more insight for looking ahead: the monthly update on business sentiment in France, followed by US data on weekly retail sales and the monthly measure of consumer confidence from the Conference Board.
France: Business Climate Indicator (07:45 GMT) Europe’s second-largest economy continues to weigh on the economic outlook for the nations that share the EUR, and the odds of a material change for the better in the near term are slim to none. But that leaves the question of whether France’s sluggish economy is at risk of turning into something darker.
In the foreseeable future, the current guesstimate is “no.” The main threat seems to be a case for chronic stagnation rather than steep short-term contraction. This outlook inspires if not demands a deep round of economic reform, although here too there’s not much confidence for predicting substantive change for the better.
Spread the yuletide cheer ... chain store managers will be pleased if the upbeat US consumer mood turns into a Christmas spending spree. Photo: Thinkstock
Voices from the government in Paris are on a mission to tell us otherwise: "my government is pro-business,” the French prime minister insisted. Maybe so, but the mood in the business sector looks like a sleepy affair at best, a view that today’s monthly update will likely reinforce.
The mood in France’s manufacturing sector in recent months has been relatively stable, but at a level that’s well below the recent peak set in 2011. The 97.1 reading for October is below its long-term average (100), as it has been since the spring. That’s not surprising, given the weak state of economic activity for the Eurozone generally.
Economic reform would help lay the foundation for boosting the prospects for growth, but the political climate doesn’t appear to be conducive to change at the moment. Even relatively moderate changes for deregulating the labour market faces determined opposition. Granted, nothing much is likely to change with the release of today’s report on business sentiment in France. That, of course, is at the heart of what's wrong with France’s economy. 
US: Chain Store Sales (12:45 GMT) ‘Tis the season for holiday shopping, but the spending trend looks surprisingly uninspiring these days. Surprising because the US economy has been relatively perky lately, as measured by the stronger pace of growth in payrolls in recent months. Retail spending, however, has been trending lower, albeit modestly, based on the year-over-year changes via the monthly numbers from Washington. The 4.1 annual rise through October match’s July’s pace, which is the lowest since March.
It’s tempting to dismiss the soft comparisons as noise, but that’s not so easy with varying degrees of macro headwinds blowing throughout the world. Japan’s recession, Europe’s stagnation, and China’s deceleration, which prompted an interest rate cut last week, are reminders that the US may be vulnerable.
The trick is deciding how much risk is lurking about. No easy task, but today’s weekly update on spending at major retail chains will offer a clue, and a timely one at that. This Friday – the day after the Thanksgiving holiday in the US – marks the start of the holiday shopping season. The trend to date, however, suggests that consumption isn’t all that conspicuous lately.
The year-over-year change in sales reflects a downward bias, based on the weekly figures published by the International Council of Shopping Centers. Last week’s release told us that sales rose by just 2.2% compared with a year ago – close to lowest levels in recent history. Is this a sign that holiday cheer will be in short supply when it comes retail spending? It’ll be tougher to dismiss the Bah-Humbug factor if today’s update suffers a sizable slide in the annual comparison.
US: Consumer Confidence Index (15:00 GMT) The growth in retail spending has been softer lately when measured on a year-on-year basis, but the mood on Main Street continues to brighten. It’s a striking divergence and eventually one side or the other will give way. Meantime, consumer sentiment winds higher.
By the Conference Board’s reckoning, sentiment rose to a seven-year high last month. “A more favorable assessment of the current job market and business conditions contributed to the improvement in consumers’ view of the present situation,” the director of economic indicators at the Conference Board explained last month. She added that the gain bodes well for retailers in this year's holiday shopping season.
A little more Christmas ho-ho-ho is at least expected in today’s data. The consensus forecast sees the sentiment index rising to 96.5 for November, up moderately from last month’s 94.5. That translates into a seven-year high. An improving trend in sentiment suggests that retail sales will reflect a bit more cheer as well in the not so distant future. There is not much sign of improvement visible in the hard data yet, but another upbeat report in today’s release will inspire warm and fuzzy thoughts for the holiday shopping season.
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