Economic data released last week further confirmed the Fed’s plan of raising interest rates during the course this week. Activity in the services in the US rose by 2.4 points to 57.2, the highest level since October 2015, in November. Further, employment jumped 5.1 percentage points to the highest level in 13 months and production improved by four percentage points. It is expected that the improvement in the services sector, which contributes 67 percent to the economic activity in the country, will boost the GDP growth to an annualized 3.5 percent. Industries in the services sector that reported growth in the month of November included retail trade, finance and insurance, construction, wholesale trade and information.
Economic data releases that are likely to move the markets this week include the rate decision and inflation data from the US and the UK; employment data from the UK, the US and Australia; FOMC Economic Projections, Building Permits and the Philly Fed Manufacturing Index.
#1: China Industrial Production (12/13/2016 Tuesday 2:00 GMT)
In China, industrial production rose by 6.1 percent on year-on-year basis in October after recording the same level of increase in September. However, the reading came in lower than the market expectation of a growth of 6.2 percent. On month-on-month basis, industrial output edged up 0.5 percent, compared to the 0.47 percent increase in the previous month. Forecast for November is a gain of 6.1 percent.
#2: UK Inflation Data (12/13/2016 Tuesday 9:30 GMT)
In the UK, CPI data showed that inflation increased 0.9 percent in October from the 1 percent increase recorded in September. The reading for the month came in lower than the analysts’ expectation of a 1.1 percent increase. Raw materials and finished goods prices improved in October, but university tuition fees and clothing prices rose more slowly than in the previous year. However, economists expect that inflation will improve following the depreciation of the GBP since the Brexit referendum. In November, the CPI is expected to record a 1.1 percent gain.
#3: UK Employment Data (12/14/2016 Wednesday 9:30 GMT)
In October, the UK employment data remained mixed. The unemployment rate edged down to a 11-year low of 4.8 percent from 4.9 percent in the previous month. Meanwhile, the number of British people claiming for unemployment benefits increased by 9,800 in the month of October. This the largest increase in five months after September’s upwardly revised increase of 5,600. However, the data suggests that the momentum in the UK labor market is going down. It is expected that number of new people claiming for unemployment benefits will be 6,200 in November.
#4: UK Average Earnings Index (12/14/2016 Wednesday 9:30 GMT)
Average weekly earnings, which includes bonuses, rose by 2.3 percent on year-on-year basis to £505 per week (before other deductions and tax) in the three months to September. The reading remained the same as that for the previous period. However, the figure was lower than the market expectation of a 2.4 percent increase. Excluding bonuses, the average regular pay per week increased by 2.4 percent to £475. Forecast for the next period is an increase of the same 2.3 percent.
#5: US Retail Sales/Core Retail Sales (12/14/2016 Wednesday 13:30 GMT)
In October, retail sales in the US rose more than what the analysts expected. It rose 0.8 percent boosted by an increase in demand for building materials and a host of other goods and stronger automobile sales. The reading for September was revised upward to a 1 percent gain, reaffirming the economy’s strength and supporting the intention of the Fed to hike interest rates this month.
Core retail sales, which excludes automobiles, also rose by 0.8 percent in October, following a 0.5 percent gain in the previous month.
While retail sales is expected to improve by 0.3 percent in November, core retail sales is forecasted to increase by 0.4 percent.
#6: US PPI (12/14/20116 Wednesday 13:30 GMT)
Inflation in the US remained steady in October following a 0.3 percent increase in September. Economists had expected a 0.3 percent gain in the month of October. An increase in the prices of energy products was offset by price declines in processed foods and services. On a yearly basis, producer prices have increased by 0.8 percent in the 12 months to October 2016.
Meanwhile, core PPI rose by 1.6 percent in the last 12 months. If the wholesale prices continue to rise, the Fed will raise interest rates for controlling inflationary pressures.
It is expected that producer prices will edge up by 0.1 percent in November.
#7: US Crude Oil Inventories (12/14/2016 Wednesday 15:30 GMT)
Crude stocks fell by 2.4 million barrels during the week ended December 2, higher than analysts’ forecast for a reduction of 1.4 million barrels. Meanwhile, the OPEC agreed to reduce output by about 1.2 million barrels per day from January in order to boost oil prices by reducing global oversupply. The organization’s expectation is that non-OPEC countries will provide the cut of 600,000 barrels per day.
#8: FOMC Economic Projections, FOMC Statement and Federal Funds Rate (12/14/2016 Wednesday 19:00 GMT)
The Economic Projections report published in September revealed that the Fed expects a GDP growth of 1.7 percent to 1.9 percent this year as against the outlook of 1.9 percent to 2.0 percent projected earlier on. Further, the Fed forecasted an unemployment rate of 4.7 percent to 4.9 percent this year, which is more than the 4.6 percent to 4.8 percent that was expected in the prior report. In the Funds Rate meeting of the Fed in November, policymakers decided to leave the rates unchanged and hinted strongly that an interest rate hike is possible in December. In her first public address following the election of Donald Trump, Janet Yellen, the Federal Reserve chairwoman, said that interest rates could be hiked soon as Trump’s victory has not affected the growth outlook for the US. This indicated that the rate hike will be implemented in December. It is expected that the Fed will increase the rates to 0.75 percent.
#9: Australia Employment Change/Unemployment Rate (12/15/2016 Thursday 00:30 GMT)
The employment market in Australia added about 10,000 jobs in the month of October, but the unemployment rate remained steady at 5.6 percent as the workforce participation dropped to a 10-year low to 64.5 percent. The increase in the number of jobs was driven by the addition of 41,500 full-time positions. The number of part-time jobs decreased by 31,700. Economists expected that the report will show an addition of as many as 20,300 jobs and the unemployment rate will remain at 5.6 percent. Analysts are of the view that there is a perceptible shift towards part-time jobs from full-time work. This could lead to a reduction in job security and a drop in consumer spending.
In November, it is expected that the employment market will add as many as 17,600 new jobs and the unemployment rate will remain at 5.6 percent.
#10: Switzerland Libor Rate/SNB Monetary Policy Assessment/SNB Press Conference (12/15/2016 Thursday 8:30 GMT)
The Swiss National Bank decided to hold the deposit interest rate at -0.75 percent, a record low, in the meeting held in September as was widely expected. In the monetary policy assessment statement published subsequently, the central bank noted that the franc is significantly overvalued and the aim of the current expansionary monetary policy is to stabilize price developments and support economic activity. Further, the central bank changed the inflation forecast for 2017 to 0.2 percent from 0.3 percent announced previously. For 2018, it was cut down to 0.6 percent from 0.9 percent. In this meeting, the Swill National Bank is not expected to change the interest rate from the current level.
#11: UK Retail Sales (12/15/2016 Thursday 9:30 MT)
In the UK, retail sales rose by 1.9 percent on month-over-month basis in October after the figure for September was revised upward to 0.1 percent. The reading came in much above the analysts’ expectation of a 0.4 percent gain. This was the largest jump since January 2016. Fore cast for November is an increase of 0.2 percent.
#12: UK Official Bank Rate/Monetary Policy Summary/MPC Official Bank Rate Votes (12/15/2016 Thursday 12:00 GMT)
In November, the Bank of England did not cut the interest rates based on 0-0-9 votes by monetary policy committee members, but said that they could go in either direction in the near term. However, the central bank revised the growth and inflation expectation forecasts for 2017 in the upward direction amid depreciation of the Sterling following the Brexit vote. The central bank projected more optimistic future growth prospects, a 1.4 percent GDP expansion in 2017 compared to the 0.8 percent prediction made in August. However, as Britain’s access to markets in the EU may be limited because of Brexit the growth may be slower for some time to come. In addition, the central bank expects the inflation rate to above the target during 2017 and 2018. It is expected to move beyond the 2.8 percent mark in early 2018 because of GBP’s fall to a 31-year low against the USD in the recent times. BoE is expected to keep the interest rate at 0.25 percent with a vote of 0-0-9 in its favor.
#13: Canada Manufacturing Sales (12/15/2016 Thursday 13:30 GMT)
Statistics Canada reported last month that the manufacturing sales in Canada rose 0.3 percent to $51.5 billion in the month of September. Sales was boosted by the fabricated metal industries and transportation equipment sectors. The manufacturing sales is expected to increase by 0.7 percent in October.
#14: US CPI/Core CPI (12/15/2016 Thursday 13:30 GMT)
In the US, the consumer prices index jumped to a six-month high of 0.4 percent in October after it recorded a 0.3 percent gain in the month of September. The reading matched analysts’ forecasts. Inflation was driven by increase in gasoline prices and rental costs.
Meanwhile, core CPI edged up 0.1 percent in October, but missed forecasts of a 0.2 percent increase. The encouraging CPI data and a stronger labor market are likely to help the Fed raise interest rates this month.
In the month of November, both the CPI and the core CPI are expected to increase by 0.2 percent from the previous month.
#15: US Philadelphia Fed Manufacturing Index (12/15/2016 Thursday 13:30 GMT)
In the Philadelphia area, the manufacturing activity continued to expand, though at a slower pace, in the month of November. The index stood at 7.6 points compared to 9.9 recorded in the month of October. It is expected that the Philly Fed Manufacturing index will rise to 9.1 points in the report for December.
#16: US Unemployment Claims (12/15/2016 Thursday 13:30)
The number of new American people filing for unemployment benefits declined by 10,000 from the five-month high level to 258,000 during the week ended December 3, indicating that the US labor market is continuing to strengthen. The Fed is likely to hike interest rates because of this positive development. The number of people filing for unemployment benefits has remained below the 300,000 mark for 92 straight weeks now.
#17: Canada BOC Governor Stephen Poloz Speaks (12/15/2016 Thursday 16:15 GMT)
Bank of Canada governor Stephen Poloz is scheduled to hold a press conference in Ottawa on the Financial System Review. Markets remain volatile during his speeches as traders look for interest rate clues.
#18: US Building Permits (12/16/2016 Friday 13:30 GMT)
The number of permits issued for buildings increased by 0.3 percent in the month of October from the previous month on a seasonally adjusted basis to 1.229 million, predicting the pace of activity in the months to come. The number of permits issued for single-family homes increased by 2.7 percent to a 762,000 and single and multifamily starts indicate that the construction sector is on a rebound path over the next two to three months. This is the highest reading in the last 12 months. Forecast for November is 1.24 million.