Ole Hansen
Commodities have faced a torrid year and there’s no let up in sight warns Saxo’s Ole Hansen. While the price of crude has stabilised this week, Libya and the forthcoming OPEC meeting are keeping up the pressure. Other event risks including the ECB and FOMC meetings are also adding general commodity price pressures, he says.
Article / 31 January 2013 at 5:56 GMT

3 Numbers to Watch: DE Retail Sales & Unemploy., US inc. & spend.

editor/analyst /
United States

Germany's retail sales and unemployment reports will lead the day's economic news, followed by the December personal income and spending update for the US.

German Retail Sales (07:00 GMT): Consumption in the retail sector probably slowed in December, but analysts expect that retail sales still eked out gain in the final month of 2012. The market is looking for a mere 0.1 percent increase in today's release, according to the consensus forecast. If so, that is a sharp decline from November's 1.2 percent surge over the previous month. Is the tepid outlook a sign of trouble for the new year? Not necessarily.

A hefty deceleration in retail sales in December cannot be ignored, although recent increases in sentiment indicators suggest that better numbers for Germany may be coming in the early months of 2013. Last week's ZEW Survey for January reflected continued improvement among analysts on the economic outlook. There was also modest improvement in the mood in the business (Ifo Survey) and consumer sectors (Gfk Consumer Climate Survey) this month. In addition, the retail Purchasing Managers' Index (PMI) for Germany hit a seven-month high, Markit Economics reported in yesterday's release (pdf).

The implication: any disappointment in today's December estimate of retail sales from the Federal Statistics Office may soon give way to more encouraging data in the weeks ahead.

German Unemployment Rate (08:55 GMT): The jobless rate in Germany is expected to remain steady at 6.9 percent for January, analysts predict. That is where the Bundesbank's widely cited rate has been since October. If it continues to hold in today's report, the upbeat sentiment news of late (see retail sales post above) will resonate a bit stronger.

It is still open for debate if the worst of Germany's recent growth slowdown has passed. A jobless rate that is falling would be stronger evidence for thinking positively, although treading water at this stage is almost as convincing. Pay closer attention to the change in the number of unemployed persons, which some analysts say offers a clearer read on the labour market's trend. The good news is that this measure has been falling in recent months from the peak set in October. Continued progress in the January update would be particularly welcome.

Granted, Europe's woes will not be easily or quickly solved merely by a stronger pace of growth in Germany. But this much is clear: Europe's prospects for moving beyond the worst of its recent troubles are dim if the Continent's leading economy still faces headwinds.


US Personal Income & Spending (13:30 GMT):Yesterday's news of an unexpected decline in US GDP in last year's fourth quarter implies that today's December update on personal income and spending is also destined for a batch of red ink. But the case for pessimism in today's data looks misguided, in part because a big chunk of GDP's stumble was due to an unusually steep drop in defence spending in Q4 - the most in four decades. That contrasts with a 2.2 percent rise in personal consumption expenditures for Q4, according to the GDP report - the strongest quarterly gain since last year's Q1.

Economists are generally projecting December gains for income and spending at rates that hug the increases published for November. The consensus forecast sees a slight uptick for income's pace in the final month of 2012: 0.7 percent vs. 0.6 percent previously. The growth rate for personal consumption expenditures, by contrast, is expected to retreat a bit to 0.3 percent in today's month-over-month comparison, or down from 0.4 percent in the November report. But that forecast looks a bit weak vs. the previously published number for December retail sales, which advanced 0.5 percent over the previous month.



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