Economic Release Alerts for January 9

German Trade Balance (NOV) (07:00 GMT; 02:00 EDT)
                     (Trade)      (Current Account)
Consensus:      15.9B            11.0B
Previous:          17.3B            11.6B

Outlook: The goods and services trade account in Europe’s largest economy is expected to have contracted in November from its recent record high. With a market consensus for a 15.9 billion euro surplus, a contraction would be the first in three months. Looking to supplementary data for the same period, expectations for a correction seems probable. From the standpoint of imports, a five year high in consumer optimism should have encouraged an unfavorable turn in trade. Also, a stagnant manufacturing PMI as well as a 13-year low in investor confidence should play a role in the period’s trade account. Investor optimism has been hit hard in the past months as fears over the government’s planned VAT hike grow at its January approach. Outside of related indicators, there are two other factors that could weigh heavily on the November balance. Demand from the US, a major trade partner with the European regions, has waned going into the end of the year as a general deceleration in the economy has influenced the spending habits of US consumers and businesses. Also, the euro started to appreciate against the dollar in earnest in November, while the exchange rate with the yen hit new highs. Should the balance start trending towards par, the ECB may have to reconsider its hawkish rhetoric going into its next rate decision this week.

Previous: Germany’s trade report marked its biggest surplus since reunification in 1990.  The 17.3 billion euro positive gap was encouraged by a modest depreciation in the nation’s shared currency and healthy demand for its manufactured goods. In October, the euro slipped a little over 3 percent against its US counterpart to 1.25.  This was encouraging for the levels of international demand. For the month, exports jumped 2.6 percent. Leveraging the improvement to the trade report, imports fell 0.2 percent as domestic spending passed the second month in the red. Domestic retail sales slipped 0.2 percent in October and a massive 1.6 percent the month before, which is certainly a guide for spending habits for imported goods. 

German Industrial Production (NOV) (11:00 GMT; 06:00 EDT)
                     (MoM)        (YoY)
Consensus:    1.0%         4.6%
Previous:       -1.4%         3.4%

Outlook: German factory activity is expected to rebound in November as domestic and foreign orders spur production. Economists estimate industrial production to bound 1.0 percent for the period, while the annual pace accelerates to a 4.6 percent gait. Predictions are best justified through the previously released factory orders indicator for the same month. Coming in exactly in line with expectations, bookings with manufacturers rebounded 1.5 percent in November for the first advance in three months. From the breakdown, domestic orders grew a modest 0.6 percent both encouraged by strong underlying GDP and hampered by an approaching tax hike. The tame local report further supports the steady contraction in retail sales for the same period. In contrast, orders from picked up with a 2.3 percent gain on the month despite appreciation in the euro over the month. More general, a pickup in factory production would be consistent with the 16-year high in business confidence and a steady decline in the jobless rate. As Germany is the largest economy in the Euro-Zone, a pick up in manufacturing activity could lift the ECB’s forecasts of local inflation and growth; and, in turn, encourage further rate hikes into new year.

Previous: German industrial production dropped 1.4 percent in October, the biggest monthly contraction in over three years.  Further inspection of the report’s breakdown reveals the drop was consistent among the industry groups. Production of capital goods dropped 1.8 percent, output of consumer goods fell 1.6 percent and construction plunged 3.0 percent. The weakness in the production data was consistent with a manufacturing survey for the same period.  A modest contraction in its headline figure was directed by the fourth consecutive contraction in its output sub-gauge while the new orders figure similarly contracted. 

Canadian Housing Starts (DEC) (13:15 GMT; 08:15 EDT)
Consensus:  220,000
Previous:   224,900

Outlook: The first of three housing reports for the week, the December housing starts figure is expected to report in with a four-month low 220,000 pace.  However, this suspected decline counters the little data that is available for interpretation. First of all, inflation trends in the months preceding December have steadily decelerated to the central bank’s optimum level. In November, core price growth for the year settled down to 2.2 percent, suggesting a rate cut could be the next move from the BoC with a direct impact on mortgage rates. Elsewhere, the weather may have played a role in construction as much of North America is experiencing some of the warmest weather in years. In terms of demand-driven ground breakings, the December employment gauge may be the best method for forecasting. Employers took on four times more employees than was expected in last month while the jobless rate stepped down to match a 31-year low 6.1 percent. With employment rising and wages advancing at a 2.6 percent pace over the year, nationwide consumer confidence may have kept starts from a deeper contraction. Housing is quickly becoming a major strut to the economy’s performance in the stead of commodity production and exports, and its strength could support a rebound in expansion from a three-year low.

Previous:  Housing starts grew for the second consecutive month in November, turning in a 224,900-pace of construction versus the 223,200 starts recorded in October. The pick up contradicted the market consensus of a modest drop to 220,000, but was led by an increase in multi-family units. Groundbreakings on single-family, urban homes actually dropped 4.2 percent to 87,900 residences for the month. Typically, single family home construction offers a better gauge of consumer spending and confidence. On the other hand, multi-family buildings accounted for the entire improvement with a 5.7 percent jump to 105,600 units. The second highest level of building permits in October may have helped forecast the November starts number, but could follow through to the future months as future home owners defer construction.

John Kicklighter is a Currency Strategist at FXCM.

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