Week Ahead: Economic Indicators (Europe)

Hey, Traders!
For the December 8th week, here is a list of all of the major economic indicators being released during the EU Session, with a brief synopsis of what they represent and what to possibly expect from the markets in reaction.

Tuesday
UK Employment
The ILO (International Labour Organisation) Unemployment Rate released by the National Statistics is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the UK Economy. If the rate is up, it indicates a lack of expansion within the U.K. labor market
What to expect:
As a result, a rise leads to weaken the U.K. economy. Generally, a decrease of the figure is positive (or bullish) for the GBP, while an increase is negative.

French, German, UK & Eurozone PMI’s
Manufacturing
The Manufacturing Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
Services
The Services Purchasing Managers’ Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are compiled into a single index which can range between zero and 100.
Composite
The Composite PMI Index measures the activity level of purchasing managers in both sectors (manufacturing and services).
What to expect:
A reading above 50 signals rising activity versus the previous month and the closer to zero the faster is activity contracting. The data are compiled by the Chartered Institute of Purchasing and Supply and Markit.
A higher than expected reading should be taken as bullish for the GBP/EUR, while a lower than expected reading should be taken as bearish for the GBP/EUR.

German ZEW
The ZEW Indicator of Economic Sentiment is calculated from the results of the ZEW Financial Market Survey. The ZEW is followed closely as a precursor and predictor of the Ifo Sentiment Survey and as such is followed closely by market participants. The data is released around the middle of the month for the current month. The survey provides a measure of analysts’ view of current economic conditions as well as a gauge of expectations about the coming six months. The latter measure tends to have a larger market impact and reflects the difference between the share of optimistic analysts and the share of pessimistic analysts. About 350 financial experts take part in the survey.
German ZEW Current Conditions
This survey summarizes the net percentage of positive and negative responses regarding the expectations for economic growth in the next 6 months, as given by financial analysts from banks, insurance companies and large industrial enterprises. For example, if 50% believe that the economic situation will improve and 20% believe it will get worse, the result will be +30.
What to expect:
A reading that is stronger than forecast is generally supportive (bullish) for the Euro, while a weaker-than-forecast reading is generally negative (bearish) for the Euro.

Wednesday
UK CPI
The Consumer Price Index (CPI) is an average measure of the level of the prices of goods and services bought for consumption by the vast majority of households in the UK. It is calculated using the same methodology developed by Eurostat, the European Union’s statistical agency, for its harmonised index of consumer prices (HICP). The rate of inflation directly affects all interest rates charged to businesses and the consumer.
What to Expect
Over the long run, the bond market will rally when increases in the CPI are small. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits. A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

Eurozone CPI
The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households.
What to expect:
Over the long run, the bond market will rally when increases in the CPI are small. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits. A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

German IFO
Business Climate
The German Ifo Business Climate Index rates the current German business climate and measures expectations for the next six months. It is a composite index based on a survey of manufacturers, builders, wholesalers and retailers. The index is compiled by the IFO Institute for Economic Research.
Expectations
German Business Expectations rates the expectations of businesses in Germany for the following six months. It is a sub-index of the German Ifo Business Climate Index.
Current Conditions
The German Current Assessment rates current business conditions in Germany, without considering future expectations. It is a sub-index of the German Ifo Business Climate Index.
What to expect:
A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

Thursday
BoE Rate Decision read our rate prep document.
ECB Rate Decision read our rate prep document.

Friday
UK Retail Sales
Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet business whose primary function is retailing and also cover internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. Headline UK retail sales are reported in volume, not cash, terms but are available in both forms. The data are derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes the 900 largest retailers and a representative panel of smaller businesses, including internet sales. Collectively, all of these businesses cover approximately 90% of the retail industry in terms of turnover.
What to expect:
With consumer spending a large part of the economy, market players continually monitor spending patterns. The monthly retail sales report contains sales data in both pounds sterling and volume. UK retail sales data exclude auto sales.
The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.