3 Numbers To Watch: EU Confidence, US Income, Spending, Sentiment

The looming US debt ceiling deadline and a possible government shutdown next week are the current main drivers together with the timing of the Federal Reserve’s tapering of its bond purchases. Next week brings the European Central Bank’s (ECB) meeting, which is expected to confirm the readiness for a new LTRO-programme, and Monday will be the last day of the month. All this should make today a quiet session ahead of the big events. That said, most of the markets, with the exception of the Scandinavian currencies, have been quite calm for a week now. Perhaps the spring has coiled, and will surprise everyone today? With the above drivers, eyes will today be on the speeches by the ECB’s president Mario Draghi and four by Fed presidents, all times are GMT:

Europe September Business & Consumer Confidence Surveys (09:00 GMT): All sentiment indices are expected to post a healthy improvement in September, continuing the trend that started in late 2012. The flash consumer confidence index was already published last Friday, and the Markit purchasing manager indices are also out for the month, so there should be no big surprises coming from the European Commission’s numbers. Of interest will be the country-level data, as confidence in Italy and Spain has improved even more than the average.


U.S. August Personal Income & Outlays (12:30 GMT): Income is expected to have risen by a healthy 0.4 percent and spending by 0.3 percent, after both registered a lackluster increase of only 0.1 percent in July. Both the income and spending have stabilised into annual growth rates of slightly over three percent, indicating the slow but more or less steady economic growth.

The more interesting part could be the personal consumption expenditure price index (PCE), which showed a yearly increase of 1.4 percent and a monthly increase of 0.1 percent in August. The Fed’s Bullard wrote last July that in the opinion of the Federal Reserve’s open market committee (FOMC) the PCE is a better measure of the inflation than the consumer price index (CPI). The blog dshort.com recently did a comparison of the two measures. The main takeaway is that PCE usually indicates less inflation than the CPI, and thus the PCE would allow a more easier monetary policy with the otherwise same constraints and targets. The October FOMC meeting will surely note that inflation remains at a low level and include that fact in its discussion on a possible tapering.

US Final September Michigan Consumer Sentiment (13:55 GMT): The month-end sentiment reading is expected to fall to 78 from 82.1 in August. The recent rising range of the sentiment puts the probable lower bound to 75, so the sentiment could start rebounding after a month or so following the current dip.

Note what happened to the consumer sentiment in 2011, when the US failed to raise the debt ceiling in time and there was a danger of a government shutdown and even debt default was a real possibility. The consumer confidence fell near the crisis lows, but at that time the euro crisis was also in a full swing. After the US fiscal issues were solved and in Europe the ECB calmed the markets with the SMP-bond purchase programme, sentiment rebounded during the following months, but the U.S. did lose its AAA-credit rating due to the self-inflicted bad policy. For a reminder see this Reuters-article from August 2011 on the drop in sentiment.