IG Markets 26 Sept Updates

Japan - National CPI (August)

Released by: Ministry of Public Management, Home Affairs, Posts and Telecommunications (monthly report)

Time: 08.30 (JST)

What is it?

The Consumer Price Index (CPI) is the most important measure of inflation in Japan.

The CPI reports changes in the price of a basket of goods and services intended to represent purchases of a typical Japanese household.

An increase in the index indicates that the basket of goods costs more (or in other words, that inflation has increased and each yen buys less).

The headline figure for CPI is the percentage change in the index on a month-on-month or year-on-year basis.

A figure is also released excluding fresh food, the prices of which are volatile and may distort the index.

Why is it important?

The CPI is carefully monitored by the Bank of Japan and has a strong influence on any monetary policy decisions that they make. If the CPI figure indicates rising inflation, the Bank of Japan may be compelled to hike interest rates in an effort to combat rising prices. Such action is likely to economic growth, while at the same time making yen a more attractive investment. Hence, a high CPI figure is bullish for yen.

What are market expectations?

A Bloomberg poll shows a median analyst expectation of 2.1% (year-on-year). The figure excluding food and energy came in at 0.2% and the figure excluding fresh food came in at 2.4%. The Tokyo CPI for September stood at 1.2%, excluding food and energy the prediction was 0.2% and 1.4% excluding fresh food.

U.S. - Personal Consumption Expenditure (QoQ) (2Q)

Released by: Bureau of Economic Analysis, Department of Commerce (monthly)

Time: 08.30 (EST)

What is it?

This is a measure of how much consumers are spending each month.

The report takes into account expenditures on durable goods, consumer products and services.

The headline figure is a percentage change from the previous month.

There is also a 'core' figure that is released, which excludes components such as food and energy. These are not included as they are particularly volatile, and may be skewed by seasonal factors. Such short-term fluctuations may distort the data, so that the core figure may present a more stable depiction of expenditure.

The headline Core PCE figure is reported as a percentage change for the quarter.

Why is it important?

Robust levels of personal spending shows that consumers are ploughing money into the economy, which should fuel growth. Personal expenditure can therefore provide an indication of economic trends. It also has a direct affect on inflation: high levels of consumption may push up prices.

Significantly, one of the Fed's primary measures of inflation is derived from PCE.

What can we expect?

Analysts surveyed by Bloomberg forecast a change in PCE of +1.7%, which is the same change as the previous month. The core PCE figure came in at 2.1% which remains unchanged from the previous figure.

U.S. - University of Michigan Consumer Sentiment Index (September)

Released by:University of Michigan (monthly report)

Time: 10.00 (EST)

What is it?

A report that assesses consumers' thoughts on the economy and their personal finances, determined via a survey of consumers from 500 households.

Why is it important?

Although the survey polls fewer consumers than the Conference Board's Consumer Confidence Index, and is not as well established, the University of Michigan Survey is acknowledged as being one of the primary indicators of US consumer sentiment and often moves the financial markets on release.

The headline figure is determined by subtracting the percentage of unfavourable responses from the percentage of favourable responses and a low or falling number is taken to be an early sign of a downturn in the economy. Consequently, investors follow this indicator closely in order to gauge the strength of the economy.

What are market expectations?

Economists surveyed by Bloomberg yielded a median forecast of 71.0, compared with the previous release of 73.1.