France publishes a hard-data update on industrial activity for October today. Later, the US releases the weekly numbers on jobless claims – the last major report on employment ahead of next week’s monetary policy announcement from the Federal Reserve.
We’ll also see fresh data on consumer sentiment via the weekly release of the Bloomberg Consumer Comfort Index. Keep in mind, too, that the Bank of England will unveil a new policy statement today and publish the minutes from its last monetary policy meeting at 1200 GMT.
France: Industrial Production (0745 GMT): Last month’s terrorist attacks in Paris will weigh on the country’s fourth-quarter GDP, the Bank of France advised this week. The central bank is now projecting a slightly lower 0.3% rise in output, which is down from the June forecast.
Nonetheless, growth in the final quarter of the year is still expected to match Q3’s pace. Even better, the setback is expected to be transitory, but in the short term tourism and related sectors will feel the economic heat. A stark example from earlier in the week: Air France KLM SA (PA:AIRF) said that it lost €50 million last month because of the violence.
The reduced growth expectations come after a modest revival in France’s macro trend. In Q3, GDP rose 0.3%, following no change in Q2. The third-quarter gain matched Germany’s GDP increase.
Today’s update on industrial activity for October will provide a key input for profiling the trend at the start of Q4. The previous two months reflected a moderately steady growth trend, with industrial output rising in the mid-1% range. In fact, economists are looking for a stronger year-over-year rate in today’s release: 2.4% versus just 1.8% in September, according to Econoday.com’s consensus forecast. The monthly comparison, however, is expected to slip back into the red.
Sentiment data for the manufacturing sector suggests keeping expectations in check. Markit’s PMI for manufacturing has remained stuck at a sluggish 50.6 reading for each of the three months through November. It’ll be useful to see how today's hard numbers published by the government compare.
US: Initial Jobless Claims (1330 GMT): The last major employment release ahead of next week’s Fed announcement will be widely read as another clue for deciding if the central bank will raise interest rates on December 16.
Last week’s nonfarm payrolls gain for November certainly provided the Fed with additional cover for tightening monetary policy. The economy added a solid 211,000 workers last month, marking the second straight month above the 200,000 level.
But two broader-minded employment indicators published this week suggest that November's trend in job creation is softer than it appears based on payrolls. The Fed’s Labour Market Conditions Index remained in positive territory last month, but just barely, slipping to its lowest level in seven months.
Separately, the Conference Board reported that its multi-factor Employment Trends Index suffered its biggest monthly decline in November since the Great Recession. The weakness “suggests caution in extrapolating the current trend of job growth,” the consultancy advised.
Today’s jobless claims report will offer more context for deciding if the trend in employment growth is weaker than recent updates suggest. Based on the crowd’s expectations, however, today’s release is still on track to support an optimistic view of the labour market.
Briefing.com’s consensus forecast sees claims sticking to 269,000 new filings (seasonally adjusted) for the second month in a row. The projection is still close to the multi-decade low of 255,000 that was reached back in July.
Short of a hefty upside surprise, today’s update is on track to act as a counterweight to the cautious numbers released earlier this week for analysing the labour market's outlook.
US: Bloomberg Consumer Comfort (1450 GMT): Retail spending has been drifting lower in recent months. The year-over-year gain was a tepid 1.7% in October, which is close to the slowest annual pace since the recession ended in 2009.
Whatever the reasons for the downshift in the appetite for spending lately it’s not because income growth is fading. Disposable personal income ticked up to a 4.1% advance in October vs. the year-earlier level – the best annual increase since January. The implication: consumers are choosing to spend less, or at least raise spending at a slower rate.
Perhaps, then, it’s no surprise to find that consumer sentiment has been stumbling lately. Bloomberg’s Consumer Comfort Index fell to a one-year low for the week through November 29. That’s “a troubling sign for the critical holiday-shopping season just under way,” said the president of Langer Research Associates, which produces the survey data for Bloomberg.
If today’s weekly update of the sentiment benchmark slips again, the news will raise new questions about consumer spending … and the case for raising interest rates at next week’s Fed meeting.
Disclosure: Originally published at Saxo Bank TradingFloor.com