3 Numbers to Watch: IT Cons. Confid., US Durables, US Dallas Fed
The January update on consumer confidence in Italy may tell us if there is any support for thinking that last week's upbeat sentiment news from Germany will rub off onto other corners of Europe anytime soon. Releases on durable goods orders for the US and manufacturing activity in Texas are on the day's list of scheduled numbers as well.
Italy Consumer Confidence (10:00 GMT) Last week brought encouraging news for the German economy via two sentiment surveys (ZEW and Ifo). The increases imply that the Eurozone recession may be easing if not ending. Stronger numbers for the Continent's leading growth engine are certainly welcome, but are there any signs of improvement from the more-troubled corners of Europe? A complete answer will take time, although today's release of consumer confidence in Italy may bring an early clue.
There was a bit of improvement in the December report for the overall consumer confidence index, although a small rise off of November's deeply depressed level is hardly a robust signal for Italy. Nonetheless, another increase would at least keep hope alive that Europe's third-largest economy may start to climb out of its funk in the months ahead.
At least one government official is anticipating better days ahead, albeit in the back end of 2013. Italy's finance minister, Vittorio Grilli, expects a "positive turning point" for the economy in this year's second half, he said last week in a session of the Economic and Monetary Affairs Committee of the European Parliament. Political cheerleading? Perhaps. Even if the macro climate is genuinely headed for improvement, the definition of a "positive turning point" should be interpreted as sluggish growth, at most, given the depth of Italy's recent headwinds. Nonetheless, an uptick in optimism could inspire hope that more of the same is coming in other reports. As such, it will be interesting to see if today's consumer confidence index shows any signs of life this month.
US Durable Goods (13:30 GMT) New orders for durable goods have mounted a modest recovery in the three months after the steep drop in August--a drop that some analysts saw as a sign that the economy was headed into a cyclical ditch. It turned out to be a head fake… so far.
The rebound in business investment--durable goods less aircraft and defense orders--has been conspicuous too. That's an early clue for thinking that Corporate America may be poised for a higher level of spending and hiring in 2013, economists say.
Today's update on new orders for December will test that theory to a degree. The market's expecting another month of growth, with one consensus forecast calling for a 2% rise for durable goods orders overall--more than double November's pace. That would be a nice way to close out 2012's chapter on industrial demand, although running the numbers through my econometric model grinder suggests a far less rosy December report. Indeed, the December rise in industrial production was ahead by a slight 0.3%. Meanwhile, the ISM Manufacturing Index barely climbed above the neutral 50 mark last month. In other words, the statistical backdrop currently suggests that we should curb our enthusiasm for expecting a strong gain in today's durable goods update.
Dallas Fed Manufacturing Index (15:30 GMT) Does factory output in Texas provide any clues for anticipating the widely watched ISM Manufacturing Index? Statistically speaking, the relationship does not look significant over the course of time. That won't stop anyone from noting that last month's rise in the production component of the Dallas Fed index preceded a modest revival in the ISM index, which was released a few days later. Econometrically persuasive or not, another gain in the January estimate of the Dallas Fed index would inspire expectations that this Friday's ISM release will follow suit.
But there is a glitch: analysts are not particularly bullish when it comes to today's data from Texas. The consensus outlook sees the general business activity component of the Dallas Fed index slipping to 4.0 from 6.8 in December. That implies that the manufacturing slice of the survey will weaken too. If so, is that a sign of January headwinds for the ISM update due at the end of the week?