3 Numbers To Watch: EZ jobs, CPI, US Personal Income & Spending
Saxo Bank | Jan 31, 2014 02:26AM ET
• Eurozone unemployment rate to remain steady at 12.1%
• Euro area flash CPI to edge up to 0.9%
• Personal income in the US forecast to come in at 0.1%
The last trading day of the month is not expected to provide large surprises in terms of data. With Hong Kong, Indonesia, China and Singapore on holiday last night, Asian markets have provided less price information on the ongoing emerging market turmoil. This suggests that attention has already shifted to next week’s US employment report and the token European Central Bank (ECB) meeting. While today’s data from the Eurozone would provide important clues on the next steps a normal central bank might take, in Europe, the ECB's possible new easing plans are not finished. Thus, technical trading and emerging markets should dominate the next couple of sessions.
Eurozone December Unemployment Rate (10:00 GMT).
The unemployment rate is expected to remain unchanged at 12.1 percent. The rate has now, after all the revisions and adjustments, remained practically unchanged for a year, hovering slightly above the 12 percent mark. There have been headlines that the stabilisation of the unemployment rate gives too optimistic a view on the economy. Just as in the US, the unemployment rate does not count in people who have stopped looking for a job, or who are employed part-time. For example, the Italian unemployment rate in November was “only” 12.7 percent, but the so-called labour underutilisation rate was at an alarmingly high 24 percent, according to a Bloomberg story.
Eurozone January Flash Consumer Price Index (10:00 GMT). The flash inflation measure is expected by consensus to increase to 0.9 percent from December’s very low 0.8 percent. This is clearly below the ECB’s 2 percent target and the downward trend has not reversed. It is not all grim, though. Lower commodity prices are depressing the price index, but that is mostly good for the European economy. On the other hand, prices are partly lifted by the austerity measures that have included tax hikes in some member countries. Overall, the ECB is currently trying its best to interpret the currently low inflation as a supply-side issue, not a demand-side issue. That allows the ECB to refrain from further easing, which would surely have to be unconventional and include taking some risk on the balance sheet of the central bank.
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US December Personal Income & Spending (13:30 GMT). Personal income is expected to post a monthly increase of 0.1 percent, slightly less than the 0.2 percent seen in November. Personal spending is seen to increase by 0.2 percent, less than November’s surprisingly large jump of 0.5 percent. December’s employment report was quite weak and together with the extremely cold weather, could have stirred spending to either direction. Spending has recently increased at a slightly higher rate than income, suggesting that the two should begin converging at some point. A slight “overperformance” of income in December-January would fit the medium-term statistical ranges.
The annual change will be “tainted” by the spike in income in December 2012, followed by a big drop the following month, so the year-on-year change should be negative, but don’t let that fool you. With the US monetary policy being what it is, tapering on autopilot and the unemployment rate near the threshold levels, attention will probably be directed to the PCE price index, the Federal Reserve’s favourite inflation gauge. The core PCE (excluding food and energy) has been trending lower since the beginning of 2012 and shows no signs of strength. At some point in 2014, the low inflation will become an issue for the Fed. It is possible the decision-making committee is just as lost as the rest of us on how to proceed, especially with the rotated voting members and the chairmanship of Janet Yellen.
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