Angus Walker
After Friday’s US jobs figures, the markets appear to be sending out mixed signals. The numbers weren’t that bad according to Saxo Bank’s Head of FX Strategy John Hardy who says there was an “odd reaction”.
Article / 26 November 2012 at 5:20 GMT

3 Numbers To Watch: DE Gfk Consumer, US Chicago Fed & Dallas Fed

editor/analyst /
United States

The consumer mood in Germany is the day’s main data point for Europe, while markets in the US await new numbers for a broad economic index and a regional manufacturing survey.

Gfk German Consumer Climate Index (12:00 GMT) The November update for this benchmark of the consumer pulse isn’t likely to rise much, if at all. But holding steady has its charms these days for Europe’s leading economy, as its neighbors struggle with a new recession. So far, so good. Last week's relatively upbeat news on Germany’s third-quarter GDP and business sentiment (Ifo Survey) lays the groundwork for thinking positively.

Recall that the previous update of the Gfk Index for October inched higher, reflecting "slightly brighter" consumer attitudes. "The fear of a recession did not increase further among consumers in Germany during fall this year," the survey's press release noted. Fast forward a month to last week’s better-than-expected Ifo update and the Q3 GDP revision for Germany, which left growth at 0.2% - unchanged from the earlier estimate. Is this enough to raise expectations that the economy is headed for better days? Probably not, at least not for the final three months of the year. "Even though we’re expecting the economy to shrink in the fourth quarter, conditions should improve in the new year," a bank economist told Bloomberg last week. "It’s going to be a dip in growth rather than a recession in Germany."

How much of a dip? Today’s update on the consumer climate may provide a clue.

US Chicago Fed National Activity Index (13:30 GMT) The monthly update of this broad read on the economic trend isn’t usually a market mover, but it provides valuable context for the question that everyone's asking these days: Is the US slipping into a new recession? No, according to September’s CFNAI report. The index’s three-month moving average (the key number to watch) in the last update stands at -0.37, or modestly above the danger level. A three-month reading below -0.7 suggests an "increasing likelihood that a recession has begun," the Chicago Fed advises.


Today's estimate for October isn’t likely to breach that tipping point, but the weak economic numbers for key indicators in recent weeks may push CFNAI to the razor's edge. Retail sales and industrial production, for example, retreated in October, arguably for temporary weather-related reasons. Nonetheless, a CFNAI reading that moves closer to the -0.7 red line will keep anxiety levels elevated as the fiscal-cliff debate rolls on in Washington.

Dallas Fed Manufacturing Survey (15:30 GMT) This sentiment profile of Texas-based manufacturing firms offers another data point to consider for assessing the US economic trend. The latest update of its national counterpart — the ISM Manufacturing Index — rose for the second straight month to a level that suggests that the economy is still expanding. Today’s news on the Dallas Fed’s survey of manufacturing sentiment will be conspicuous only in the unlikely scenario that it decisively contradicts the moderately encouraging ISM number.


Still, it wouldn’t be surprising to see the Dallas Fed data slide a bit. True, the ISM number published earlier this month — 51.7 —is encouraging, but only slightly. An ISM reading above 50 implies growth, but 51.7 still leaves room for debate about what comes next. Confidence on the macro outlook, after all, is still playing defense. Europe has skidded into a new, albeit mild recession, while the threat of the fiscal cliff lingers for the US. Borderline readings on manufacturing data will only promote a wait-and-see attitude in the markets. But short of an awful reading from the Dallas Fed report, today’s release could easily end up as a yawn. That's fine for the moment, when no news is still good news in an increasingly anxious environment.


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