Series of important U.S. economic data throughout the week ahead, culminating with the Non-Farm Payrolls and Employment Situation report, will kick-start the month of September as traders dissect each and every economic release in search for clues about the state of the U.S. economy and the prospects for a QE3 announcement at the Fed’s September 20-21 meeting.
In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.
1. USD- U.S. Personal Income and Outlays, a measure of the income received and purchases made by consumers, released along with the Personal Consumption and Expenditures Price Index- an indicator of inflation preferred by the Federal Reserve, Mon., Aug. 29, 8:30 am, ET.
The Fed’s preferred inflation gauge, the core PCE Index which excludes food and energy costs, is expected to show inflationary pressures rising by 0.2% m/m in July, compared with 0.1% m/m in the previous month. Consumer spending in the U.S. is forecast to register an increase by 0.5% m/m in July, recovering from the 0.2% m/m drop in June.
2. USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring the amount of homes under contract to be sold, Mon., Aug. 29, 10:00 am, ET.
Another red flag from the housing market could be raised by the U.S. pending home sales index with forecasts pointing to a 0.8% m/m decline in July following the increase by 2.4% m/m in June.
3. USD- U.S. Consumer Confidence Index of consumers’ outlook on present and future economic conditions, Tues., Aug. 30, 10:00 am, ET.
The sequence of weak economic data from the world’s largest economy could continue with the confidence of U.S. consumers forecast to deteriorate as the index declines to 55 in August from 59.5 in July.
4. USD- U.S. FOMC Meeting Minutes, a detailed record of the Fed’s last monetary policy meeting that may provide an outlook on the economy, inflation and the Fed’s future monetary policy, Tues., Aug. 30, 2:00 pm, ET.
The minutes from the Federal Open Market Committee’s last meeting are not expected to tell us anything that we don’t already know, but should remind the markets of the Fed’s concerns about the “frustratingly slow” recovery and will echo the U.S central bank’s commitment to keep rates “exceptionally low” until 2013.
5. EUR- Euro-zone Flash HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Wed., Aug. 31, 5:00 am, ET.
Inflationary pressures in the Euro-zone are expected to remain unchanged at 2.5% y/y in August, same as the 2.5% y/y reading in July, but still above the European Central Bank’s 2% target level.
6. USD- U.S. ADP - Automatic Data Processing Employment Report, a measure of jobs lost or added to the private sector of the economy, also serving as a leading indicator of the monthly non-farm payrolls, Wed., Aug. 31, 8:15 am, ET.
After adding 114K new jobs in July, the U.S. private sector is forecast to create another 110K jobs in August. A worst-than-expected ADP report would confirm the Fed’s concerns about the lack of significant improvement in the U.S. labor market.
7. CHF- Swiss GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., Sep. 1, 1:45 am, ET.
Although growing a bit faster that the 0.3% q/q pace in the first quarter, the Swiss economic growth in Q2 2011 is expected to be revised lower at 0.4% q/q, compared with the preliminary estimate of 0.6% q/q. The lower GDP revision could serve as a reminder of the negative impact of the strong franc on the Swiss economy, keeping the Swiss National Bank determined to curb any further franc appreciation.
8. USD - U.S. Jobless Claims, an important gauge of employment trends and labor market conditions, Thurs., Sep. 1, 8:30 am, ET.
Remaining stubbornly above 375K, the level below which economists estimate that jobless applications would need to fall in order to see a significant decline in unemployment, first-time applications for unemployment benefits are expected to reach 409K from 417K in the previous week.
9. USD - U.S. ISM Manufacturing Index, a leading indicator of industrial activity, where a reading above or below 50 is the dividing line between economic expansion and contraction, Thurs., Sep. 1, 10:00 am, ET.
This could become an event with the potential to spook the markets next week as the U.S. manufacturing sector is forecast to register a contraction with an ISM index reading of 48.5 in August from 50.9 in July.
10. USD - U.S. Non-Farm Payrolls and Employment Situation Report, one of the most important indicators of economic health, measuring the number of new jobs created or lost in the world’s largest economy, Fri., Sep. 2, 8:30 am, ET.
Following the more upbeat Non-Farm Payrolls data in July, the weakness in the U.S. labor market could continue for another month with consensus forecasts expecting the U.S. economy to add up to 110K jobs in August, compared with 117K in July. Despite of the expectations for the unemployment rate to stay unchanged at 9.1%, the current rate of jobs creation barely keeps up with population growth and will not be sufficient enough to significantly lower the unemployment levels anytime soon. Another weak and disappointing Non-Farm Payrolls report could become the catalyst that could move the Fed closer to QE3 in an effort to speed up the “frustratingly slow” pace of recovery at the expense of the U.S. dollar.