Kay Van-Petersen
Australia’s Q3 CPI figures proved positive, says Saxo Capital Markets’ global macro strategy Kay Van-Petersen, but the banks didn’t appear to be buying it.
Article / 11 October 2016 at 4:59 GMT

3 Numbers: Germany’s ZEW sentiment index to tick higher

editor/analyst /
United States
  • Germany’s ZEW economic sentiment survey is on track to tick higher 
  • US small business sentiment to rise despite sharp decrease in small-firm job growth 
  • Will Fed’s Labor Market Conditions Index support the case for a rate hike?

By James Picerno

Economic sentiment for Germany is in focus today with the October update of ZEW’s survey data. Later, two US numbers will round out the September macro profile via reports on small business sentiment and the US Federal Reserve’s multi-factor Labor Market Conditions Index.

  Germany's exports increased a strong 5.4% in August, the biggest monthly
advance in six years. Photo: iStock

Germany: ZEW Economic Sentiment (0900 GMT) A strong rebound in exports in August suggests that the economy is rebounding from a “summer slump,” as the Centre for Economic Studies labeled the slowdown in August.

The trend looks firmer in the wake of yesterday’s news that exports increased a strong 5.4% in August vs. the previous month (in seasonally adjusted terms), marking the biggest monthly advance in six years. The year-over-year comparison improved too: exports jumped 9.8%, reversing nearly all of July’s 10% slide.

The official view also reflects a modestly brighter outlook. Germany’s economy minister last week said that the economy is set to grow a bit faster in 2016 than previously expected. “The upswing in the German economy is solid,” said Sigmar Gabriel.

The crowd will be looking at today’s update on economic sentiment from ZEW for insight on how financial analysts view the macro outlook. Recent readings have been lacklustre, particularly for the expectations data. But economists are looking for mildly firmer numbers in today’s October release.’s consensus forecast sees the current situation index ticking up to 55.9, a two-month high. The expectations index is on track to rise as well, reaching 4.5 in October, a four-month high. The projections still equate with relatively soft growth for Europe’s biggest economy, but any news that shows a degree of improvement will offer fresh evidence for thinking that economic activity may be picking up in the second half of the year.

US: Small Business Optimism Index (1000 GMT)  US private-sector job growth ticked higher in September, suggesting that the labour market is still expanding at a moderate pace. But the growth rate for payrolls at small companies tumbled.

Employment at firms with fewer than 50 workers posted the smallest gain last month in nearly three years, based on ADP data. The weak rise of just 34,000 in September dropped by more than 50% from the previous month’s gain.

The weakness isn’t encouraging, but today’s update on the mood in the small-business community isn’t expected to reflect any damage. The National Federation of Independent Business (NFIB) is expected to report a small rise for its Small Business Optimism Index in September: 95.0 vs. 94.4 in August, based on’s consensus forecast.

If the prediction holds, a slightly firmer reading will provide cover for arguing that the sharp deceleration in small-company job growth in September was a one-off event. On the other hand, a downside surprise in today’s sentiment data will inspire fresh worries about the state of job growth in the small-company segment, which is considered a bellwether for the trend in US payrolls generally.

US: Labor Market Conditions Index (1400 GMT) The Federal Reserve’s monthly profile of the labour market has been wallowing in negative territory for much of the year to date. July posted the first positive reading in 2016, but the index dipped below zero again in August. If the red ink rolls on in today’s September release, the news may be read as another clue for expecting that the central bank will be hard pressed to raise interest rates this year.

Fed Vice Chairman Stanley Fischer over the weekend noted that last month’s decision to leave interest rates unchanged was a “close call,” although he added  that “leaving the target range for the federal-funds rate unchanged did not reflect a lack of confidence in the economy.”

CME data on Monday continued to show that Fed fund futures continue to point to a low probability of a rate hike at next month’s FOMC meeting, but December remains in play, with the crowd pricing in a roughly 70% chance for tighter policy in the final month of the year.

The odds for a year-end hike may climb further if the Labor Market Conditions Index (LMCI) returns to positive territory in today’s update. Note, however, that last year’s December hike aligned with a positive 2.6 reading for LMCI. By that standard, LMCI will have to make a sharp U-turn before the Fed begins to lift the price of money for the second time since the Great Recession ended.

 Create your own charts with SaxoTrader; click here to learn more

– Edited by Susan McDonald

James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail