Next week, the Conference Board will release its September data for the US consumer confidence index. Last month, the expectations index barely breached the 80-point mark, which generally indicates a possible recession next year. It will be interesting to see if the September data fall below the 80 mark or if August's sentiment is reversed. In addition, the US and UK will update their GDP growth estimates for the second quarter of 2023.
Tuesday, 26.09. 14:00 GMT, US CB Consumer Confidence (September)
The Conference Board's Consumer Confidence Index (CCI) measures consumer confidence in the economy. It is an indicator that can predict future consumer spending, a key factor in overall economic activity. Higher values indicate greater consumer optimism. The CCI is measured based on the level of confidence in 1985, which was set at 100 points. An index above 100 points indicates a higher confidence level than in 1985. Conversely, a value below 100 points means a lower confidence level than in 1985.
In August, there was a notable decrease in the CB Consumer Confidence Index, which fell from 114.0 in July to 106.1 (versus the forecast 116). The Present Situation Index, reflecting how consumers view current business and job market conditions, also declined from 153.0 to 144.8 in the same period. However, the Expectations Index, which gauges consumers' short-term outlook regarding income, business, and job market conditions, dropped to 80.2 in August, reversing the significant increase observed in July when it reached 88.0. It's worth noting that expectations just barely surpassed the 80 mark, historically associated with signalling a recession within the following year.
Source: www.conference-board.org/
A higher-than-expected reading may have a bullish effect on the USD, while a lower-than-expected reading could be bearish for the USD.
Impact: USD
Thursday 28.09. 12:30 GMT, US Gross Domestic Product (GDP) QoQ (2Q update)
Gross domestic product (GDP) indicates the total value of goods and services produced in a country for a certain period. GDP is an important indicator of the health of an economy because it gives an overall picture of how well or poorly it is doing. If the GDP growth is higher than expected, the economy is in good shape and growing faster than expected. On the other hand, if the GDP growth is lower than expected, the economy performs weaker than anticipated.
According to the latest estimates, the US economy expanded at an annualized rate of 2.1% in Q2 2023, slightly lower than the initial estimate of 2.4%. This growth rate marked a modest improvement compared to the 2.0% expansion observed in the first quarter of the year. A downward adjustment in both private inventory investment and nonresidential fixed investment characterized the revisions in this report. However, there was a compensating upward revision in state and local government spending.
Consumer spending slowed significantly, with a growth rate of 1.7% in the second quarter compared to a more robust 4.2% in the first quarter. Government consumption also exhibited a similar trend, easing to a 3.3% growth rate from 5.0% in the previous quarter. Notably, nonresidential fixed investment experienced its most substantial increase in nearly a year, surging by 6.1% as opposed to the meagre 0.6% growth in the prior quarter.
On the export front, there was a significant decline, the largest since the aftermath of the COVID-19 outbreak in the second quarter of 2020. Exports fell by 10.6% in the second quarter, in sharp contrast to the 7.8% growth recorded in the first quarter. In addition, residential fixed investment continued its downward trend, falling by 3.6%, extending a slump that has lasted for nine consecutive quarters. It's also worth noting that private inventory investment had a negative impact on GDP in this period.
Source: Tradingeconomics.com
A higher-than-expected reading may have a bullish effect on the USD, while a lower-than-expected reading could be bearish for the USD.
Impact: USD
Friday 29.09. 06:00 GMT, UK Gross Domestic Product (GDP) QoQ (2Q update)
Meanwhile, the latest estimates in the UK show a slight quarter-on-quarter expansion of 0.2% in Q2 2023, surpassing earlier expectations of a flat reading and following a 0.1% growth in Q1. The services sector recorded a 0.1% growth, driven by industries such as motion picture production, video production, TV program production, computer programming, and food and beverage services. This boost was attributed to favourable weather conditions and an uptick in live events. Additionally, the production sector witnessed a notable increase of 0.7%, with manufacturing growing by 1.6%, primarily led by manufacturing motor vehicles, trailers, and semi-trailers. Construction also experienced growth of 0.3%, while the mining sector contracted by 4.3%, mainly due to declines in crude petroleum and natural gas extraction.
On the expenditure side, household consumption exhibited robust growth, rising by 0.7%. This growth was particularly pronounced in sectors like transport, recreation, culture, restaurants, hotels, and gas. Government consumption saw a significant surge of 3.1%. In contrast, there was no growth in gross fixed capital formation, as a 3.4% increase in business investment was offset by a 6.7% decline in government investment. Exports also fell by 2.5%, while imports rose by 1%.
Source: Tradingeconomics.com
A higher-than-expected reading may have a bullish effect on the GBP, while a lower-than-expected reading could be bearish for the GBP.
Impact: GBP
Friday 29.09. 09:00 GMT, Eurozone Consumer Price Index (CPI) YoY (September preliminary)
The CPI index measures changes in the prices of consumer goods and services. It covers different types of products, such as food, fuel, transportation services, cosmetics, household goods, clothing, and many others. The purpose of the CPI index is to measure the increase or decrease in the cost of living for consumers. As the CPI index rises, consumers' purchasing costs increase, affecting their money's purchasing power. The CPI index is used to monitor inflation or the overall rise in prices in the economy. It allows us to assess whether prices are rising too fast or too slowly and to determine what economic policy measures should be taken to offset the adverse effects of inflation.
In August 2023, the annual inflation rate within the eurozone was adjusted downward to 5.2%, revising it from the initial estimate of 5.3%. This marks the lowest level recorded since January 2022. In comparison, a year earlier, inflation stood significantly higher at 9.1%. However, it remains more than twice the European Central Bank's (ECB) target of 2%.
During August, the most notable contributors to upward price pressure were the costs of services, which increased by 5.5% (a slight decrease from July's 5.6%), followed by food, alcohol, and tobacco, which rose by 9.7% (down from 10.8%). Non-energy industrial goods also experienced inflation at a rate of 4.7%, down from 5% in the previous month. Although energy prices continued to decrease, the rate of decline slowed to -3.3% from the previous -6.1%.
On a monthly basis, the consumer price index (CPI) rose by 0.5%, slightly below the 0.6% initially estimated. Notably, the ECB recently raised its inflation forecasts for 2023 (to 5.6%) and 2024 (to 3.2%). This upward revision is mainly due to a more pronounced increase in energy prices. For 2025, the central bank expects inflation to average around 2.1%.
Source: Tradingeconomics.com
If the reading is higher than expected, inflation is higher, possibly favouring a fall in the EUR. Meanwhile, it is also a stimulus for the ECB to raise interest rates and reduce the money supply, causing an increase in the EUR. If the reading is lower than expected, it may give the ECB an argument to stop its policy of raising interest rates.
Impact: EUR, STOXX, DAX and other indices
Stocks to watch
Costco (COST) announcing its earnings results for the quarter ending on 08/2023. Forecast EPS: 4.79. Positive earnings surprise in 5 out of the last 10 reports. Time: Tuesday, September 26, after the market closes.
Micron (MU) announcing its earnings results for the quarter ending on 08/2023. Forecast EPS:
-1.18. Positive earnings surprise in 8 out of the last 10 reports. Time: Wednesday, September 27, after the market closes.
Accenture (ACN) announcing its earnings results for the quarter ending on 08/2023. Forecast EPS: 2.66. Positive earnings surprise in 9 out of the last 10 reports. Time: Thursday, September 28, before the market opens.
Nike (NKE) announcing its earnings results for the quarter ending on 08/2023. Forecast EPS: 0.7489. Positive earnings surprise in 9 out of the last 10 reports. Time: Thursday, September 28, after the market closes.
Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis, and opinions contained, referenced, or provided herein are intended solely for informational and educational purposes. The personal opinion of the author does not represent and should not be constructed as a statement, or investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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