Eco Calendar Proves to be Interesting Today

Today, the eco calendar will catch trader’s attentions with the eurozone industrial production data, US retail sales and Greek and Portuguese GDP data. The BoE will release its quarterly Inflation Report and the Fed will publish the minutes of its latest FOMC meeting. Tropical Storm Sandy will probably have a significant impact on the October retail sales, although the storm hit the East coast only at the end of the month.

After increasing significantly for three consecutive months, US retail sales are forecast to have weakened slightly in October. The consensus is looking for a decline by 0.2% M/M, but we believe that the risks are for a weaker outcome mainly due to the Tropical Storm. This analysis is flawed but it is what the markets are expecting. Others interpretation, say retail sales should have soared as a storm threat sends everyone to buy food, emergency supplies, backup generators, addition gas to fill up cars and building supplies to hunker down. As soon as the storm ends those people breathe a sigh of relief and now stock up on foods and other gear incase of next time. Auto sales are increased due to damage to vehicles and property damage repairs. Motor vehicle sales were disrupted, as was also the case for gasoline station sales, except consumers filled their tanks to capacity ahead of the storm and auto purchases were just delayed a few days. Grocery and drug store sales, on the contrary, might have profited from emergency sales in advance of the storm, while another strong month is forecast for electronics after the release of the new iPad and iPhone. Overall, analysts ( and some of us do not ) believe that the negative impact from Sandy might have been somewhat bigger than estimated, which should mainly result in a weaker headline figure. Core retail sales, excluding autos and gas, are forecast to have risen by 0.4% M/M. Also for the core, we are slightly more pessimistic.

In the euro zone, industrial production is forecast to have weakened in September after two consecutive monthly increases. Over the previous days, the consensus has been scaled down massively, after poor national data. At the moment, the consensus is looking for a 2.0% decline in September after poor data from Germany, France, Spain and Italy. Although analysts expect a very poor outcome, the consensus might be slightly too pessimistic. Both in Greece and Portugal, the first estimate of third quarter GDP is scheduled for release, but not much is expected here.

In the US the FOMC minutes which usually shake up the markets and are known to cause volatility, are not expected to hold any surprises because the last meeting was one of the most widely covered economic events of the year, followed by speeches, press interviews and in-depth reviews. Mr. Bernanke’s pretty much laid an open book on the table. It might be interesting if markets read otherwise today.