3 Numbers To Watch: French Manufacturing, UK Retail, US Homes

Today’s update on sentiment among manufacturers in France will be closely watched for guidance on evaluating the Eurozone’s macro outlook. Later, we’ll also see a new report that gauges the mood in Britain’s retailing industry, followed by the August report on new home sales in the US.

France Manufacturing Business Survey Index (06:45 GMT): Sentiment surveys throughout the Eurozone suggest better days ahead for economic activity overall, but the hard data is still mixed at best for countries other than Germany. Indeed, judging by recent data for France, the case for optimism still rests mostly on hope. But hope can’t be dismissed as a relevant factor. Rising expectations always precede stronger comparisons with real spending and output numbers. Keep that in mind with today’s monthly survey update of the mood in France’s manufacturing industry.

Sentiment among business leaders in the Eurozone’s second-largest economy has improved in each of the past four months, according to this business climate indicator, including last month's release. The trend suggests we’ll see increasingly upbeat numbers for the economy generally. But that’s still wishful thinking, or so the numbers for industrial production this year reveal. Other than a brief but-so-far-fleeting upturn in the spring, industrial activity has been more or less flat in 2013. That’s in sharp contrast with the increasingly optimistic outlook among manufacturing executives in France. Is this a sign that industrial output and other macro metrics will soon follow? The case for answering “yes” will be a bit easier if today’s business survey index posts another gain.

UK CBI Distributive Trades Index (10:00 GMT): Britain’s economy has delivered a persuasive run of encouraging economic reports in recent months, but last week’s August profile of retail sales was a rare exception. Consumer spending including fuel slipped 0.9 percent last month—the first monthly slide since April. Analysts think it’s a temporary setback in an otherwise solid economic recovery. Nonetheless, today’s September release of a survey of retail firms by the Confederation of British Industry (CBI) will be closely watched for clues on where consumer spending is headed in the months ahead.

The trend to date in the CBI Distributive Trades Index certainly looks bright. In the August report, this leading indicator posted its third consecutive gain, reaching the highest level since November 2012. The bullish trend of late has tracked the stronger pace of year-over-year gains in the hard data for retail sales. Even so, last month’s increase in the annual rate of growth for retail spending softened a bit. All the more reason to pay close attention to today’s CBI data for deeper perspective on what to expect in the September retail sales report, scheduled for release on October 17.

US New Home Sales (14:00 GMT): Yesterday’s update on housing prices suggests that higher mortgage rates are slowing the rebound in the residential property market, but only on the margins. The S&P Case-Shiller 20-City Home Price Index rose 0.6 percent in July versus the previous month, down from 0.9 percent in the June release (based on seasonally adjusted data). But the year-over-year increase of 12.3 percent ticked up a bit from the annual pace in June and is now advancing at the strongest rate since 2006. "The slowing in monthly gains is not a nail in the recovery's coffin," advises an analyst at Quicken Loans, a mortgage provider. "In fact it shows a normalizing of the market and that this growth can be sustained."

Today’s update on new home sales will serve as a reality check for the optimistic view that the housing recovery will roll on. The stakes are relatively high in the wake of last month’s report, which showed a sharp decline in the seasonally adjusted annualized rate of sales: 394,000 in July versus 455,000 for June. But economists think that plunge is only temporary and that today’s update will show a sizable rebound. The consensus forecast sees new home sales for August reviving to a 425,000 annualized rate. If that turns out to be wrong, however, and today’s number disappoints to the downside to any substantial degree, it’s going to be hard to shake off the worry that the housing market is headed for a rough ride in the remaining months of the year.