US WEEK AHEAD: NON-FARM PAYROLLS, FOMC MINUTES, FACTORY ORDERS, TRADE BALANCE

November factory orders likely rose 1.8%, with soft non-durable orders alongside lower energy and commodity prices.

Durable orders were previously reported up 3.5%, boosted by a gain in aircraft orders. The new information in the report will be on non-durable orders, which we forecast fell slightly in nominal value alongside lower energy and commodity prices.

We forecast the November trade balance remained roughly stable at -USD40.4bn from -USD40.6bn in October.

Energy prices moved lower in November, which is likely to bring down the nominal size of the import bill for crude oil products. We also look for softer imports of foods, feeds, and beverages again, alongside softer agricultural prices (-0.6% MoM in the import price index). Automotive imports likely increased alongside stronger auto sales. On the export side of the ledger, the November ISM survey showed a pick-up in demand in new export orders, suggesting a strong month for capital goods exports, likely offset by some pull-back in consumer goods exports after a moderate increase last month.

Taper decision focus of December FOMC minutes.

The December FOMC minutes will provide insight into the decision to begin tapering asset purchases this month. The interest of market participants will be in the discussion over the pace of further reductions and the weight policymakers gave to the factors (declining unemployment and rising core inflation) in arriving at those decisions. We currently look for another USD10bn reduction to USD65bn to be announced at the end of the 29 January FOMC meeting.

Our non farm payrolls forecast looks for a 200K gain in December with the unemployment rate rounding to 7.1% Employment-related information released so far this month is consistent with a continued moderate pace of hiring.

The December Consumer Confidence report suggested slight improvements in the lab-our market with fewer people reporting jobs as hard to get, and slightly more reporting jobs as plentiful. The employment component in the Dallas Fed’s Texas Service Sector Outlook survey moved higher, pointing to solid hiring in the private sector services. Manufacturing surveys for December such as the Philadelphia Fed Business Outlook Survey, the Empire State Manufacturing Survey, and the ISM Manufacturing survey all pointed to improvements in the pace of factory hiring. The ADP Employment Report, released Wednesday, will round out the set of data we input into our forecasting models, and we will look at revising our forecast if these reports come in far from expectations.

In the household survey, we look for the unemployment rate to move up to 7.1%. Employment gains will likely remain positive, though we expect at a more moderate pace following November’s 818K employment gain. We anticipate that employment gains will be offset by gains in the workforce, causing the unemployment rate to round 7.1%.