Week Ahead: Economic Indicators (US)
For the December 2nd week, here is a list of the major economic indicators released during the US Session.
Monday 2nd December
09:45 ET
US S&P Manufacturing PMI November Final
The US S&P Manufacturing PMI is a monthly economic indicator that measures the performance of the manufacturing sector.
It is based on surveys of purchasing managers in manufacturing companies, focusing on production, new orders, employment, supplier delivery times, and inventory levels.
As a diffusion index, a reading above 50 indicates expansion, while below 50 signals contraction.
It is valued for its timeliness and insight into manufacturing trends and economic health.
What to Expect
If the manufacturing PMI comes in higher than expected, that indicates strong demand for manufactured goods, which points to a resilient consumer, and decreased fears of an economic slowdown.
This would be likely to cause strength across the US assets (dollar, yields and US stocks), whereas if it comes in weaker than expected, we would expect weakness across US stocks.
10:00 ET
US ISM Manufacturing PMI
The US ISM Manufacturing PMI is a monthly indicator of economic activity in the manufacturing sector, compiled by the Institute for Supply Management.
It is based on a survey of purchasing managers across various industries and measures aspects such as new orders, production, employment, supplier deliveries, and inventories.
As a diffusion index, a reading above 50 signals expansion in manufacturing, while a reading below 50 indicates contraction.
The ISM Manufacturing PMI is closely watched as a gauge of overall economic health and business conditions due to the size of the survey respondents in this report.
What to Expect
If the manufacturing PMI comes in higher than expected, that indicates strong demand for manufactured goods, which points to a resilient consumer, and decreased fears of an economic slowdown.
This would be likely to cause strength across the US assets (dollar, yields and US stocks), whereas if it comes in weaker than expected, we would expect weakness across US stocks.
Difference between US S&P and ISM Manufacturing PMIs
The US S&P Manufacturing PMI and the ISM Manufacturing PMI both measure activity in the manufacturing sector but differ in their methodologies and focus:
Survey Panel
S&P PMI: Based on a broader, international panel of companies, focusing on large, mid-sized, and small firms, offering a global and comprehensive view.
ISM PMI: Focuses more on larger, US-based firms, with input from supply managers.
Weighting
S&P PMI: Weights components based on their relative importance to economic activity.
ISM PMI: Uses equal weighting for its subcomponents, like new orders, production, and employment.
Scope
S&P PMI: Primarily designed for private-sector companies.
ISM PMI: Includes input from public-sector organizations and takes a broader supply-chain perspective.
These differences can lead to variations in their readings, although both aim to provide insights into manufacturing trends and overall economic health.
Tuesday 3rd December
10:00 ET
US JOLTS Job Openings for October
The US JOLTS Job Openings report, released monthly by the Bureau of Labor Statistics, measures the number of unfilled jobs in the economy at the end of the reporting period.
It provides insights into labor demand and serves as a key indicator of the labor market’s health.
It includes data on job openings, hires, quits, layoffs, and separations across various industries.
A high number of job openings typically signals strong labor demand, while low numbers might indicate economic weakness.
It is closely monitored by the Federal Reserve and analysts to assess economic trends and wage pressures.
What to Expect
If Job Openings come in higher than expected, indicating higher demand from US companies for labor, this could precede a downturn in the Unemployment rate. This would likely strengthen the US dollar and yields but cause a more mixed/whipsaw reaction for US equities.
If it comes in lower than expected, indicating lower demand for labor, this could cause weakness in the dollar and bond yields and a more mixed/whipsaw reaction in equities.
The mixed equities reaction is because of the 2 major factors that the markets are paying attention too that are linked to labor at the moment.
Firstly, lower demand for labor indicates a potentially higher or unchanged unemployment rate, which would increase the chances of a broader economic slowdown linked to the employment situation, which is bearish for stocks.
Secondly, it would increase the chances that the Fed may need to intervene with steeper interest rate cuts in order to stimulate job growth, which is bullish for stocks.
The combination of these 2 contradictory factors creates the chance that the equity markets may see a more volatile/whipsaw reaction to this data point, and other employment reports as well.
Wednesday 4th December
08:15 ET
US ADP Employment Change for November
The US ADP Employment Change report is a monthly measure of private-sector employment growth, published by the ADP Research Institute.
It estimates the change in the number of jobs added or lost in the non-farm private sector compared to the previous month.
While not always aligned with the official Bureau of Labor Statistics employment data, it is closely watched as an early indicator of labor market trends.
Analysts and investors use it to gauge the strength of job creation and its potential implications for consumer spending and economic growth.
What to Expect
If the ADP Employment Change is higher than expected, this is likely to cause strength in the dollar and bond yields, and potentially strength in the S&P 500 as well, depending on the size of the deviation, though US stocks are likely to see more of a whipsaw reaction.
This is because higher employment change indicates a strong jobs market, which reduces chances of an economic slowdown and a cold jobs market, and reduces the Fed’s need to intervene with steeper rate reductions in order to stimulate the jobs market, both of which are bullish for the dollar and bond yields, but for US stocks however, reduced rate cut bets are seen as bearish, but stronger jobs market overall is seen as bullish, hence the chance for a more mixed reaction in this case.
If it comes in lower than expected, we would expect to see weakness in the dollar and bond yields, and a similar mixed reaction in US stocks, unless the negative deviation is much larger than expected, then a downside bias for US stocks may come into play.
09:45 ET
US S&P Services PMI November Final
The US S&P Services PMI measures the performance and activity level of the US services sector.
It is based on a survey of purchasing managers and tracks variables like new orders, employment, business activity, and input prices.
As a diffusion index, a PMI reading above 50 indicates expansion in the services sector, while a reading below 50 signals contraction.
This index is considered a timely indicator of economic health, as services account for a significant portion of US GDP.
It complements other PMIs, such as manufacturing, to provide a broader view of economic trends.
What to Expect
If the services PMI comes in higher than expected, that indicates strong demand for services, which points to a resilient consumer, and decreased fears of an economic slowdown.
This would be likely to cause strength across the US assets (dollar, yields, and US stocks), whereas if it comes in weaker than expected, we would expect weakness across US stocks.
10:00 ET
US ISM Services PMI for November
The US ISM Services PMI is a monthly indicator of the economic health of the US services sector, compiled by the Institute for Supply Management.
It surveys purchasing managers in various service industries, focusing on areas like new orders, business activity, employment, and prices.
As a diffusion index, a reading above 50 indicates growth in the services sector, while a reading below 50 signals contraction.
The ISM Services PMI is closely monitored as it reflects trends in a sector that constitutes a large portion of the US economy, influencing markets and monetary policy decisions.
What to Expect
If the services PMI comes in higher than expected, that indicates strong demand for services, which points to a resilient consumer, and decreased fears of an economic slowdown.
This would be likely to cause strength across the US assets (dollar, yields, and US stocks), whereas if it comes in weaker than expected, we would expect weakness across US stocks.
Differences between US S&P and US ISM Services PMIs
The US S&P Services PMI and the US ISM Services PMI both measure activity in the US services sector but differ in key ways:
Survey Respondents
S&P Services PMI surveys a broader range of companies, including smaller firms and private companies.
ISM Services PMI focuses more on larger, established firms, often with more emphasis on public companies.
Weighting and Calculation
S&P PMI uses a simpler, standardized approach to calculate its index, often resulting in faster release times.
ISM PMI employs weighted averages and has a more detailed methodology, with components like employment and supplier deliveries influencing the overall score.
Release Timing
S&P PMI is typically released earlier in the month as a preliminary (“flash”) reading and then finalized later.
ISM PMI comes later in the month and provides a single comprehensive report.
Sector Focus
S&P PMI has a more global methodology, making it easier to compare with other countries’ PMIs.
ISM PMI is uniquely tailored to US business conditions, reflecting domestic nuances more closely.
Both indicators are valuable, but their differences in scope and methodology can lead to variations in their readings, offering complementary perspectives on the services sector.
US Factory Orders for October
US Factory Orders is a monthly economic indicator released by the US Census Bureau that measures the dollar value of new orders placed with manufacturers for both durable and non-durable goods.
Durable goods are items expected to last at least three years, like machinery and appliances, while non-durable goods include products like food and clothing.
An increase in factory orders suggests rising demand for manufactured goods, signaling economic growth, while a decrease may indicate a slowdown in manufacturing and economic activity.
What to Expect
Strength in the manufacturing sector would decrease the chances of a recession, as it underlines a resilient economy, at least in this sector, which would likely prompt strength across US assets, and the opposite would likely be true if it came in lower than expected.
10:30 ET
US Weekly EIA Crude Oil Inventories
The US Weekly EIA Crude Oil Inventories report, released every Wednesday by the Energy Information Administration, details the amount of crude oil held in storage across the United States.
It provides insights into the supply and demand dynamics of the oil market.
What to Expect
An increase in inventories suggests higher supply or lower demand, potentially leading to lower oil prices. Conversely, a decrease indicates lower supply or higher demand, which can drive prices up.
Thursday 5th December
08:30 ET
US Initial & Continued Jobless Claims
The US Weekly Initial & Continued Jobless Claims report tracks unemployment insurance claims to gauge the health of the job market. Initial claims measure the number of people filing for unemployment benefits for the first time, indicating new job losses.
Continued claims reflect the number of individuals who remain unemployed and are still receiving benefits after their initial filing.
Together, these metrics provide timely insights into labor market conditions and potential economic shifts.
What to Expect
With employment in focus at the moment, this report has been garnering a lot of market attention.
A higher jobless claims number, indicating higher unemployment, would be likely to cause weakness across the US assets (dollar, stocks, and yields), as it feeds into the narrative of a hard landing/broader economic slowdown for the US economy as we come out of the tightening cycle.
A lower jobless claims number, indicating lower unemployment, would be likely to cause strength across the US assets, as it reassures the markets that the US economy may be able to exit the tightening cycle and enter the easing cycle without a recession/broader economic slowdown.
Keep in mind that there has been some volatility in the US equity markets reaction to this data point, as the markets are fighting between the data’s indicator on the broader economy, as well as the potential future impact the data has on monetary policy.
US Trade Balance for October
The Trade Balance is an economic indicator released that measures the difference between the value of the country’s exports and imports of goods and services.
A trade deficit occurs when imports exceed exports, while a trade surplus happens when exports exceed imports.
The trade balance is a key component of a country’s current account and reflects the demand for a country’s goods and services abroad as well as domestic demand for foreign goods.
It provides insights into the economic health and competitiveness in the global market and can influence exchange rates & GDP.
What to Expect
This number is unlikely to create a meaningful market reaction without a large deviation from expectations.
Having said that, a deeper than expected deficit (lower than expected number) could cause weakness across assets (dollar, stocks, and bond yields) due to its negative effect on GDP, and the opposite could be true if it comes in higher than expected.
Friday 6th December
08:30 ET
Employment Situation for November
US Nonfarm Payrolls
US Nonfarm Payrolls, commonly referred to as NFP, is a key economic indicator published by the Bureau of Labor Statistics on a monthly basis.
It represents the total number of paid workers in the US, excluding farm employees, government workers, and non-profit organization employees.
The NFP report provides insights into the overall health of the labor market, reflecting changes in employment levels.
The data is closely watched by policymakers, economists, and investors for its impact on financial markets and economic policy decisions.
US Unemployment Rate
The US Unemployment Rate is a widely tracked economic indicator that measures the percentage of the labor force that is unemployed and actively seeking employment.
It is calculated by dividing the number of unemployed individuals by the total labor force.
The Unemployment Rate can differ from the Nonfarm Payrolls data due to differences in their definitions and methods of measurement.
While NFP represents the total number of paid workers in the US, excluding certain categories like farm and government employees, the Unemployment Rate considers the percentage of the labor force that is actively seeking but unable to find employment and is conducted via household surveys as opposed to payrolls data.
US Average Earnings YoY
US Average Earnings Year-over-Year is an economic indicator that measures the annual percentage change in the average earnings of all non-farm employees in the United States.
Average earnings include wages and salaries, and the YoY comparison helps assess the rate of change in workers’ compensation over a one-year period.
Positive growth in Average Earnings YoY is indicative of increasing income levels, while negative growth suggests a decline in average earnings. This data point gives insights into wage trends and their implications for consumer spending and inflation.
What to Expect
The US Nonfarm Payrolls is the most highly monitored employment indicator by both traders and policymakers.
Employment has been in focus since the last Nonfarm Payrolls report on August 2nd, which showed an unexpected weakening in the labor market, and prompted FOMC officials to pay greater attention to the employment situation.
Since then, markets have been reacting to employment reports for their effect on the broader economy, as opposed to its impact on monetary policy.
With that being said, if Nonfarm Payrolls comes in higher than expected, and the Unemployment Rate comes in lower than expected, there would likely be strength across the US assets (US stocks, dollar, and government bond yields) as it decreases the likelihood of recession/broader economic slowdown, increasing the chances for a soft landing.
If NFP comes in lower than expected, and the Unemployment Rate comes in higher than expected, We would expect weakness across the US stocks, dollar, and government bond yields.
This would solidify the bets of a broader economic slowdown, which increases the chances of a hard landing/recession and would prompt the Fed to move faster and harder in terms of policy response to react to the slowdown in the jobs market.
Keep in mind that the markets will be balancing between the data’s effect on the future of monetary policy, and its effects on the broader economy, which can cause variations/volatility in the reactions.
10:00 ET
The University of Michigan Sentiment Survey November Final
Conducted by the University of Michigan, the survey gauges consumers’ attitudes and expectations regarding personal finances, business conditions, and overall economic prospects.
The survey results are presented as an index, with higher values indicating greater consumer confidence.
In this report, respondents can also give their forecasts for 1-year and 5-10-year ahead inflation expectations, which the markets pay attention to.
What to Expect
When it comes to the headline sentiment read, a higher consumer sentiment number at the moment would be seen as bullish for US stocks and the dollar, as it indicates that the consumer is feeling good about the economic environment, which reduces the chances for a hard landing coming out of this Fed tightening cycle.
When it comes to inflation expectations, the markets will want to see these coming in lower than expected, which would increase confidence in the Fed’s ability to reduce rates and start to stimulate the areas of the economy that have shown weakness.
This would likely cause strength in US stocks.
