3 Numbers to Watch: US Consumer Sentiment, German PPI, Canada CPI

The Eurozone crisis looks to have been placed on hold until the end of August, as European officials jet off on their summer holidays. Meanwhile, the markets have been searching for a catalyst in the US. The dollar rallied sharply against the yen yesterday after data showed US hiring picked up in early August. The strong US retail sales and industrial production numbers have also been encouraging and there is now a sense the Federal Reserve will delay a third round of quantitative easing until after the US elections. Improved numbers from the University of Michigan Consumer Sentiment Index may justify this move as consumer confidence begins to recover.

The University of Michigan Consumer Sentiment Index (13:55 GMT) Provisional numbers for the Michigan index show consumer sentiment is likely to come in unchanged at 72 for early August. Last week’s retail sales figures showed signs that consumer confidence is returning, with growth of 0.6% compared to the 0.1% anticipated. However, surveys continue to find consumers and businesses are uncertain about the immediate outlook for the economy. The Philly and New York Federal Reserve manufacturing surveys have both came back lower than expected. Meanwhile, the Michigan consumer sentiment index has dipped from 77.8 in May.

German PPI (06:00 GMT) The price of manufactured goods and services in Germany is expected to decelerate as the continued weakness in the Eurozone economy squeezes manufacturing. PPI is expected to rise by just 0.3% in July, after a decline of -0.4% the previous month, although this is still below its annual trend. The trend has been the same in the Eurozone, where producer prices fell by 0.5% in June, continuing the sharpest drop in prices in 3 years.

Canadian CPI (12:30 GMT) Friday's inflation release may help determine whether the Bank of Canada plans to begin raising rates again. Its governor, Mark Carney, has hinted the central bank is prepared to take action to prevent the housing market from overheating. However, recent data suggests the housing market has cooled somewhat. Figures on housing starts published for July showed the number of new homes built in Canada declined by 6.1% from last year, compared to growth of 2.4% in June. But Canada’s strong export growth and recovery in household spending could put additional pressure on CPI going forward. Core CPI inflation is forecast to have stayed put at 2% in July.