Week Ahead: Economic Indicators (Europe)
Here are the major releases for the week of the 16th December
Monday – 16th December
PMI Data for Europe Nations (03:15 – 04:30 ET)
The main releases will come from France, Germany and the UK.
If data is stronger than expected, the currency would see strength, and vice versa.
Manufacturing PMI
The Manufacturing Purchasing Managers’ Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).
Services PMI
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 synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).
Composite PMI
The Composite PMI Index measures the activity level of purchasing managers in both sectors (manufacturing and services). A reading above 50 indicates expansion in the sector; a reading below 50 indicates contraction.
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Tuesday – 17th December
02:00 ET
UK Employment Data
UK Unemployment Change
Change in the number of people claiming unemployment-related benefits during the previous month, released by the ONS (Office National Statistics). As the UK provides a lot of benefits to its population, requiring a lot of money, the more people that sign on, the money that will have to be pooled from the government’s budget to support people.
UK Unemployment Rate
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. 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.
UK Employment Change
Change in the number of employed people. Data represents the 3-month moving average compared to the same period a year earlier.
UK Average Weekly Earnings Ex Bonus
The Average Earnings Index is an indicator of inflationary pressures emanating from the labour market. The effect of a higher or lower figure than expected can be both bullish or bearish.
UK Average Weekly Earnings
The Average Earnings Index measures change in the price businesses and the government pay for labor, including bonuses. The Average Earnings figure gives us a good indication of personal income growth during the given month.
Generally, a high reading is seen as negative (or bearish) for the GBP, while a low reading is seen as positive (or bullish). By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it is a reasonable bet that interest rates will have to rise and bond and stock prices will fall. In contrast, when jobs growth is slow or negative, then interest rates are more likely to decline – boosting bond and stock prices in the process.
04:00 ET
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.
German ifo 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.
German ifo 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.
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.
The results are released the same month as the survey is taken. More than 7000 businesses are surveyed.
05:00 ET
German ZEW Economic Sentiment
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 the larger market impact and reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic. 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.
The survey deals with the markets of Germany, the USA, Japan, Great Britain, France, Italy and other EU countries.
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.
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Wednesday 18th December
02:00 ET
UK CPI Report
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 CPI is the Bank of England’s target inflation measure. The rate of inflation directly affects all interest rates charged to businesses and the consumer. Inflation is an increase in the overall price level of goods and services.
As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
Core CPI
Over the short term, the central bank focuses on several core measures which seek to strip out the most volatile components and so give a much better guide to underlying developments. Amongst these, financial markets normally concentrate upon the narrowest gauge which excludes energy, food, alcohol and tobacco.
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.
05:00 ET
Eurozone HICP & CPI Report
Inflation is an increase in the overall price of goods and services. The harmonised index of consumer prices (HICP) is a measure of consumer prices used to calculate inflation consistently across the European Union. Changes in the index provide an estimate of inflation, as targeted by the European Central Bank (ECB). Eurostat provides statistics for the EU and Eurozone aggregates, individual member states and the major subsectors.
The measure of choice in the European Monetary Union (EMU) is the harmonized index of consumer prices which has been constructed to allow cross member state comparisons. In the European Monetary Union, where monetary policy decisions rest on the ECB’s inflation target, the rate of inflation directly affects all interest rates charged to businesses and the consumer.
As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
Eurozone Core Inflation
Over the short term, the central bank focuses on several core measures which seek to strip out the most volatile components and so give a much better guide to underlying developments. Amongst these, financial markets normally concentrate upon the narrowest gauge which excludes energy, food, alcohol and tobacco.
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Thursday 19th December
02:45 ET
French Business Climate Manufacturing & Overall
INSEE is France’s National Institute of Statistics and Economic Studies. INSEE’s business climate indicator aims to summarise the mood of French business leaders. The survey asks questions about output, orders and inventories and expectations for future business. These are synthesised into an overall index of sentiment, adjusted so that the long-run average is 100. The main focus is the manufacturing sector but the survey also provides separate confidence measures for construction, retail trade and services on a monthly basis and for wholesale trade every other month.
If you are looking for clues on French business sentiment, this survey would be a good starting point. The indicator is based on a survey that asks business leaders about their expectations for new orders and their overall impressions of the economy. The results are a diffusion index that reflects the difference between positive and negative responses as a percentage of the total number of answers.
French Business Climate Overall
This concept tracks the general state of the economy as it relates to businesses. it can include broad economy-wide conditions or specific economic conditions of a particular industry.
07:00 ET
BoE Bank Rate
What is it?
The Bank of England’s monetary policy committee members vote on where to set the rate.
What are the fundamental effects?
Could have an effect on businesses for the sudden change in the cost of credit on their corporate balance. Consumers could also be affected since the shifts in Monetary policy influence other short-term rates like Bank deposits, personal loans, credit cards, home equity loans and adjustable-rate mortgages. Higher rates might make banks more reluctant to borrow overnight funds, so might lend out less money or charge businesses and consumers a higher rate to offset the rates.
How does it affect the markets?
CURRENCY – The pound might rally if the BoE is showing an inclination to raise interest rates. How much the pound might move depends on if the Foreign Exchange Markets have taken these hikes into consideration. If they have taken it into consideration then the dollar movement may be minimal.
STOCKS – The relationship between stock prices and the BoE interest rate is quite direct when rates rise or hinted that they will be. Higher rates might dampen inflation pressures, but rate hikes also increase the cost of doing business and could cut profit margins.
BONDS – Investors might flee the long bonds if rates rise as it could confirm that inflation is on the rise and they may instead chase the shorter-term securities. As the sale of bonds accelerates their yields will rise, once investors grow confident that the monetary policy is working and inflation appears steady, they switch to buying bonds again to lock in the highest yield possible.
UK BoE Meeting Minutes
What is it?
A detailed record of the Bank of England’s policy-setting meeting.
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Friday 20th December
02:00 ET
UK Retail Sales
Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet businesses 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.
Core Retail Sales
The Core number excludes Auto Fuel, which tends to be very volatile.
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.
