The monthly update on merchandise trade data is the main event for Eurozone numbers today. The key question is whether exports will continue to slide?
Later, two reports will dominate Monday's macro news for the US: the regional manufacturing data via the New York Fed and the national numbers for industrial production.
EU: Merchandise Trade (10:00 GMT) The Eurozone dodged a bullet last week, or so it seemed with a better-than-expected rise in third-quarter gross domestic product. Economic activity rose 0.2% during the July-through-September period vs. the previous quarter, according to Eurostat’s flash estimate.
That’s a bit better than the 0.1% advance that was projected via the consensus forecast. But nothing’s really changed for Europe’s macro outlook. Sluggish growth is still the best-case estimate for the near-term future, although even that modest estimate comes with plenty of caveats these days.One measure of the degree of the risk that lurks for the Eurozone can be found in the trend in exports. In theory, a weaker EUR should lead to growth in exports, offering a timely boost for the economy when local growth is suffering. In practice, however, there’s not much evidence to date that this year’s currency devaluation – the EUR has fallen 9% against the USD so far in 2014 – is juicing exports for the euro area overall.
In the previous update from Eurostat, exports fell 0.9% in August (seasonally adjusted) vs. the previous month for the countries that share the EUR. That’s the third straight monthly decline and the fourth monthly slide in the past five months. Recent numbers look more encouraging on a year-on-year basis (unadjusted terms), although the previous run of annual growth faded in August, with exports dropping a hefty -2.9% vs. the year-earlier level.
Exports were thought to be a rare source of growth for the Eurozone. But the optimism on this front has yet to pan out, for a number of reasons, including a challenged trading relationship with Russia due to the Ukraine crisis and a slowdown in emerging markets.
Another report that highlights falling exports in today’s trade update will remind the crowd that Friday’s surprisingly upbeat GDP data for the Eurozone isn't a reliable estimate for the future.
US: Empire State Manufacturing Survey (13:30 GMT) Economic growth in the US continues to trend positive. Encouraging news arrived in several updates last week, including a moderate rebound in retail spending for October after September’s slump.
Meanwhile, data from the government shows that jobless claims in early November remain close to a 14-year low while the number of job openings for September touched a post-recession high.
The cyclically sensitive manufacturing sector has been printing encouraging results as well. An early clue on how this corner of the economy will fare in the final months of the year arrives in today’s regional update for the New York Fed’s district.
In the report for October, the growth rate in business activity overall suffered a sharp deceleration. But the modest rise doesn’t look worrisome as long as the national trend is holding up. In fact, that's what the October figures show for the US via the ISM Manufacturing Index, which rebounded to 59.0 last month, matching August’s data in reaching a three-year high.
In line with the national numbers, Briefing.com’s consensus forecast sees a healthy revival in today’s update: the NY Fed Index is expected to rise to 12.0, a sizeable gain from the 6.2 reading in the previous release.
Yet there are increasing worries that Europe’s troubles and the slowdown in Asia will soon catch up with America. If so, a sign of stronger headwinds may show up as a weaker-than-expected reading in today’s November report from the New York Fed.
US: Industrial Production (14:15 GMT) Industrial output in the US has been growing at an annual pace of 4%-plus lately and more of the same is expected in today’s update for October. Although the monthly comparison is on track to post a sharply slower gain vs. September’s hefty 1% surge, the 0.2% projected advance via the consensus forecast translates into a decent year-on-year rise of 4.4%. If Briefing.com’s survey estimate holds, industrial activity will post its strongest annual increase since July.
Credit Agricole, however, last week projected a flat monthly performance due to soft output in mining and utilities. Manufacturing activity for last month, by contrast, is expected to increase 0.3%, according to the bank.
A pullback after September’s unusually strong rise wouldn’t be surprising, nor would it threaten the overall narrative of persistent growth for the broader economy. For the moment, the US is in no danger of relinquishing its role as the poster boy for macro resilience.
Indeed, the American economy is in a sweet spot at the moment, in part because oil and gasoline prices are falling. The resulting windfall for disposable income is supporting retail spending and otherwise providing an energy-related stimulus package. "[Lower oil prices are] going to be a big boom for consumer spending," Frank Holmes, CIO at US Global Investors, said last week.
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