As next week marks the end of August and the end of the summer holidays, investors may be bracing themselves for September, which is historically the worst month for stock returns, according to Dow Jones data. Next week, we will be following trends in US consumer confidence, followed by US GDP growth figures for the second quarter and the US unemployment rate. On the other side of the Atlantic, the preliminary result for August inflation in the Eurozone will be released.
Tuesday, 29.08. 14:00 GMT, US CB Consumer Confidence (August)
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 is 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 level of confidence than in 1985.
In July, the Conference Board Consumer Confidence Index exhibited another increase, reaching 117.0, which was better than expected (111.8) and up from the June figure of 110.1. The Present Situation Index, which measures consumers' assessment of current business and labour market conditions, rose to 160.0 from 155.3 in the previous month. Similarly, the Expectations Index, which measures consumers' near-term anticipations for income, business prospects, and labour market situations, improved to 88.3 from its June value of 80.0. Significantly, the Expectations Index has surged well above the threshold of 80, historically recognized as a level that indicates an impending recession within the subsequent year. Despite the ascent in interest rates, consumer sentiment remains optimistic, potentially driven by reduced inflation and a robust job market. However, the significant difference between the Present Situation Index and the Expectations Index may highlight the consumers' uncertainty about the future.
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
Wednesday 30.08. 12:30 GMT, US Gross Domestic Product (GDP) QoQ (2Q)
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 initial estimates, the United States economy displayed an annualized expansion of 2.4% in the second quarter of 2023. This growth rate surpasses the 2% growth experienced in the preceding quarter and notably exceeds the market's projected growth of 1.8%. Nonresidential fixed investment underwent a substantial acceleration, surging by 7.7% compared to the prior quarter's 0.6%. This growth was mainly driven by a rebound in investment in equipment, which rose by 10.8% after contracting by 8.9% in the previous quarter, and investment in products based on intellectual property, which grew by 3.9% after contracting by 3.1% in the previous quarter.
In contrast, consumer spending experienced a marked deceleration, rising by 1.6% compared to the previous quarter's robust 4.2%. Despite this slowdown, consumer spending still exceeded market predictions, as inflationary pressures eased, and the labour market maintained its tightness. Notably, while consumption of goods witnessed a marked slowdown, increasing by 0.7% compared to the previous 6%, spending on services remained resilient, expanding by 2.1% compared to the prior 3.2%.
Meanwhile, public expenditure increased at a more subdued rate of 2.6% in comparison to the previous 5%. On the other hand, net trade had a negative impact on growth, subtracting 0.12 percentage points. It resulted from exports declining by 10.8% and imports experiencing a lesser decline of 7.8%.
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
Thursday 31.08. 09:00 GMT, Eurozone Consumer Price Index (CPI) YoY (August 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.
The Eurozone's consumer price inflation rate for July 2023 was reported at 5.3%. This marked the lowest level since January 2022, primarily attributed to a further reduction in energy prices, which saw a decrease of -6.1%, compared to the previous -5.6%. Additionally, there was a moderation in costs for alcohol and tobacco, which saw a change of 10.8% as opposed to the previous 11.6%, and for non-energy industrial goods, where the adjustment was from 5.5% to 5%.
Conversely, the rate of inflation for services accelerated to 5.6%, up from the previous 5.4%. Meanwhile, the core inflation rate, which omits prices of energy, food, alcohol, and tobacco, remained steady at 5.5%. Notably, this core inflation rate has now surpassed the headline rate for the first time since 2021.
Source: Tradingeconomics.com
On the one hand, if the reading is higher than expected, inflation is higher, which may favour 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. On the other hand, 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
Friday 1.09. 12:30 GMT, US Unemployment Rate (August)
The unemployment rate is the percentage of people without a job actively seeking employment in the previous month relative to the total number of people of working age or in the labour market. A high unemployment rate means that a large number of people are out of work despite actively seeking employment. A low unemployment rate indicates a stable labour market and greater availability of jobs.
Unemployment rates are important for economic analysis and can affect social and economic aspects. A high unemployment rate is associated with lower incomes and increased poverty, while a low unemployment rate promotes increased wages and social welfare. Governments and policymakers monitor the unemployment rate to assess the effectiveness of employment policies and take action to create jobs and support the unemployed. However, it should be remembered that the unemployment rate is one of many tools for assessing the labour market. Analyzing other indicators, such as the labour force participation rate or wages, is also important.
In July 2023, the unemployment rate in the United States witnessed a marginal decline, reaching 3.5%, down from June's 3.6%, and surpassing market anticipations which had predicted a 3.6% rate. The number of individuals classified as unemployed decreased by 116 thousand, resulting in a total of 5.841 million, while the count of employed individuals saw an increase of 268 thousand, reaching 161.262 million. The U-6 unemployment rate, a broader measure that encompasses individuals who desire employment but have ceased active job-seeking, as well as those who work part-time due to a lack of full-time opportunities, experienced a decrease from 6.9% in June to 6.7% in July. Despite these shifts in unemployment figures, the labour force participation rate remained stable at 62.6% in July. This rate is notable for maintaining its highest level since March 2020.
Source: Tradingeconomics.com
A higher-than-expected reading may have a bearish effect on the USD, while a lower-than-expected reading could be bullish for the USD.
Impact: USD
Stocks to watch
HP Inc (HPQ) announcing its earnings results for the quarter ending on 07/2023. Forecasted EPS: 0.8548. Positive earnings surprise in 8 out of the last 10 reports. Time: Tuesday, August 29, after the market closes.
Salesforce Inc (CRM) announcing its earnings results for the quarter ending on 07/2023. Forecasted EPS: 1.9. Positive earnings surprise in 10 out of the last 10 reports. Time: Wednesday, August 30, after the market closes.
Lululemon Athletica (LULU) announcing its earnings results for the quarter ending on 07/2023. Forecasted EPS: 2.53. Positive earnings surprise in 10 out of the last 10 reports. Time: Thursday, August 31, 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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