Week Ahead: Economic Indicators (US)
For the December 16th week, here is a list of the major economic indicators released during the US Session.
Monday 16th December
09:45 ET
US S&P Manufacturing & Services PMI December Final
The US S&P Manufacturing & Services PMI are monthly economic indicators compiled by S&P Global that measure the activity levels in the manufacturing and services sectors, respectively.
As diffusion indices, a reading above 50 indicates expansion, while below 50 signals contraction.
US S&P Manufacturing PMI: Assesses the performance of the manufacturing sector by surveying purchasing managers about new orders, production, employment, supplier delivery times, and inventory levels.
US S&P Services PMI: Evaluates the services sector by surveying purchasing managers on factors like new business, employment, input prices, and business expectations.
What to Expect
Higher than expected PMIs would increase the chances for a soft landing, especially if the employment breakdown in the report is positive, as this indicates there is still enough demand to feed into corporate profits and overall US growth, which would be likely to cause strength in US stocks and the dollar.
The opposite is likely true if it were to come in lower than expected.
Tuesday 17th December
08:30 ET
US Retail Sales for November
US Retail Sales is a monthly economic indicator that measures the total sales of goods and services by retail stores across the United States.
Released by the Census Bureau, it provides insights into consumer spending trends, which is a key driver of the economy since consumer spending makes up about 70% of the US GDP.
An increase in retail sales signals economic growth and consumer confidence, while a decline suggests weakening demand.
The report covers a wide range of sectors, from automobiles to clothing, and is monitored by economists, policymakers, and investors to assess the health of the economy.
What to Expect
If retail sales come in higher than expected, we would be likely to see strength across the US assets (dollar, yields and US stocks), as it shows a resilient consumer in the face of tighter monetary conditions, which increases the likelihood of a soft landing for the US economy as we come out of the tightening cycle.
If it comes out weaker than expected however, we would be likely to see weakness across US assets.
Canadian CPI for November
The Canadian Consumer Price Index measures the average price change over time for a basket of goods and services commonly purchased by households in Canada.
It’s a primary gauge of inflation, tracked monthly by Statistics Canada, reflecting how prices fluctuate for items like food, shelter, clothing, and transportation.
The CPI impacts monetary policy, as the Bank of Canada uses it to guide interest rate decisions, controlling inflation and maintaining economic stability.
What to Expect
If Canadian inflation comes out higher than expected, we would expect to see weakness in CA stocks, and strength in CAD, as it would increase the chances of a pause from the BoC rate cuts, as rates may need to stay higher in order to make sure that inflation is completely under control.
If it comes in lower than expected, we would expect CA stocks to strengthen and CAD to weaken, as it would increase bets on the BoC continuing its rate reduction path.
09:15 ET
US Industrial Production for November
US Industrial Production is a monthly economic indicator released by the Federal Reserve that measures the output of the nation’s industrial sectors, including manufacturing, mining, and utilities.
It tracks changes in the volume of goods produced by factories, mines, and power plants, providing insights into the strength of the industrial sector.
Growth in industrial production signals economic expansion, while a decline may indicate a slowdown.
This indicator is closely monitored by policymakers, economists, and investors to assess the overall health of the economy and predict future economic activity.
What to Expect
Industrial Production is unlikely to cause a market reaction, based off of historical releases over the past year.
Having said that, an increase in Industrial Production would indicate an increase in demand for manufactured goods, which translates to a picture of a resilient consumer, which could reduce recession fears and cause strength across US assets.
If it were to come in lower than expected, the opposite could be true, as it could indicate deteriorating demand for manufactured goods, meaning a weaker consumer, and a higher chance of a recession in the US.
Wednesday 18th December
08:30 ET
US Housing Starts for November
US Housing Starts measures the number of new residential construction projects that have begun over a specific period, typically monthly.
It’s a key economic indicator, as increased housing starts suggest strong economic growth and consumer confidence, while declines may signal an economic slowdown.
Housing starts data provides insight into construction activity, employment, and future housing supply, influencing real estate, construction, and finance sectors.
What to Expect
This release is unlikely to cause a meaningful market reaction.
Having said that, if Housing Starts come out higher than expected, we would expect to see strength across the US assets (Dollar, bond yields, and US stocks), as it would indicate that the consumer is doing well in the face of tight financial conditions, and that demand for housing was strong.
If it came out weaker than expected, then we would expect weakness across the US assets for the opposite reason.
10:30 ET
US EIA Weekly Crude 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.
14:00 ET
US Interest Rate Decision
The US Interest Rate Decision is a policy announcement made by the Federal Reserve (Fed) during its Federal Open Market Committee (FOMC) meetings, typically held eight times a year.
The decision sets the target range for the federal funds rate, which influences borrowing costs across the economy.
Raising rates: Slows economic activity to curb inflation.
Lowering rates: Stimulates growth by making borrowing cheaper.
Holding rates steady: Indicates a balanced economic outlook, or an uncertainty on the future outlook.
The decision is based on economic indicators like inflation, employment, and growth, with significant implications for markets, businesses, and consumers. Markets closely follow the announcement and accompanying statements for clues about future policy.
FOMC Rate Statement
The release also contains the FOMC Rate Statement, which is a written announcement issued by the FOMC.
It provides the Federal Reserve’s decision on interest rates and insights into its monetary policy stance.
The statement includes whether the federal funds rate is being raised, lowered, or held steady.
It discusses the Fed’s assessment of economic conditions, including growth, inflation, and employment trends.
It highlights the Fed’s goals, such as achieving maximum employment and stable inflation at around 2%.
Markets scrutinize the statement for changes in tone or language, as it signals the Fed’s outlook and potential future actions.
What to Expect
Markets and median analyst expectations expect the FOMC to cut rates by 25 bps, from 4.75% to 4.5%.
In the unlikely event that rates are left unchanged, we would expect a large amount of weakness in US stocks, and strength in the dollar and government bond yields, as pricing in for the expected rate cut is undone and reversed.
But If the 25 bps cut is realized, attention will turn to the rate statement.
If the rate statement is more hawkish (underlines uncertainty about the strength of the jobs market and inflation return to target), this could indicate to the markets that the pace of rate cuts may slow down, which would be likely to cause weakness in US stocks, and strength in the dollar.
If the rate statement is more dovish (underlines increased confidence in inflation return to target, and satisfaction in the strength of the jobs market) this could confirm that the Fed can go ahead with further rate cuts, which would be likely to strengthen US stocks and weaken the dollar and government bond yields.
Thursday 19th December
08:30 ET
US GDP Q3 3rd Estimate (Final)
The US GDP Q3 3rd Estimate is the final revision of the Gross Domestic Product growth rate for the third quarter of the year, released by the Bureau of Economic Analysis (BEA).
This estimate incorporates the most comprehensive data available, including trade, business investment, and consumer spending, to provide the most accurate measurement of economic performance for the quarter.
The 3rd estimate often confirms or slightly adjusts earlier estimates.
This figure is monitored by policymakers, investors, and economists for trends in growth and potential implications for monetary policy.
This report also contains an inflation component, the US GDP Price Index.
It measures the overall change in prices for goods and services included in the Gross Domestic Product.
It reflects inflation or deflation within the economy over a given period.
Unlike the Consumer Price Index (CPI) or the Personal Consumption Expenditures (PCE) Price Index, the GDP Price Index includes all components of GDP (consumer spending, business investment, government spending, and net exports).
Often used to adjust nominal GDP to real GDP by removing the effects of price changes.
What to Expect
If headline GDP comes in higher than expected, we would expect strength across the US assets (US stocks, bond yields, and the dollar) as it shows strong growth in the US, which can bring investment into US government-backed assets and corporations.
If it comes in lower than expected, we would expect the opposite.
As for the inflation components (US GDP Price Index and the Core PCE), if these came in higher than expected, we would expect weakness in US stocks and strength in the dollar and government bond yields, as traders reduce their bets on Fed rate cuts.
However, if they come in lower than expected, we would expect strength in US stocks, and weakness in the dollar and government bond yields, as traders would solidify/increase their bets on Fed rate cuts.
US Weekly 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.
Friday 20th December
08:30 ET
US PCE for November
The US Personal Consumption Expenditures Price Index is a key measure of inflation, tracking the change in prices for goods and services purchased by households.
It is published monthly by the Bureau of Economic Analysis (BEA).
Headline PCE includes all items, while Core PCE excludes food and energy prices for a more stable view of underlying inflation.
The Federal Reserve uses Core PCE as its preferred inflation gauge when setting monetary policy, aiming for a 2% annual target.
PCE is broader than the Consumer Price Index (CPI) because it accounts for changes in consumer behavior, such as substitutions, and includes a wider range of expenditures.
What to Expect
If PCE inflation comes in higher than expected, we would expect to see weakness in US stocks and strength in the dollar and government bond yields, as traders would be likely to pull back on their expectations for further rate cuts from the Fed.
If inflation comes in lower than expected, we would expect strength in US stocks, and weakness in the dollar and government bond yields, as traders would be likely to increase/solidify their bets on further rate cuts from the Fed.
10:00 ET
The University of Michigan December Final Survey
The University of Michigan Survey measures consumer sentiment and is released monthly. It assesses how consumers feel about current and future economic conditions, including personal finances, business climate, and overall economic prospects.
The survey has 3 vmain components:
Current Conditions Index: Gauges consumers’ views on the present economic situation.
Expectations Index: Reflects their outlook on the economy over the next six months.
It is a key indicator of consumer confidence, which can influence spending behavior and, consequently, economic growth. Markets and policymakers closely monitor it for insights into consumer trends.
Inflation Expectations: Gives insight into the survey respondents’ outlook for inflation on a 1-year and a 5-10-year-ahead basis.
What to Expect
If the headline Sentiment read comes in higher than expected, this underscores a resilient consumer and reduces the chances of an economic slowdown. This would be likely to cause strength across the US assets (dollar, stocks, and bonds)
If it comes in lower than expected, we would expect the opposite reaction.
However, there is also the inflation expectations.
If these come in higher than expected, we would expect weakness in US stocks and strength in the dollar and government bonds, as higher inflation could cause the markets to pull back on bets of rate cuts from the Fed.
If the inflation expectations come in lower than expected, we would expect strength in US stocks and weakness in the dollar and government bond yields, as traders solidify/increase their bets on rate cuts from the Fed.
