Markets are settling into the extended year-end holidays, with slow news and low trading volumes, and one major data release this week that could substantially shake things up. Tuesday sees the release of additional data delayed by the US government shutdown, along with new figures.
The data the market is likely to focus on most is the US Q3 GDP and the December consumer confidence index. An essential part of the monetary policy outlook depends on how the economy will perform. The Fed cut rates at its last meeting, based on the perception that the labour market was cooling alongside the rest of the economy. That would also help slow inflation. Traders will be keen to see if projections continue to be met.
Clearing Up Ambivalent Data
Last week’s CPI release added to overall uncertainty about the US economy, leaving analysts eager to get more data. Q3 GDP statistics were collected before the government shutdown, so they should provide a clear picture of the economy. And that could be important, because the shutdown began in Q4, which means the next GDP figure could have some data-collection issues. Markets – and policymakers – might be relying on Q3 data for a while, especially going into the first quarter of next year when the Fed has to make a crucial decision about whether to keep easing.
Tuesday’s data is a preliminary reading of Q3 GDP, and could be revised with the final number next year. However, those revisions are typically rare. What markets are looking for is a still-resilient but slowing economy, consistent with forecasts that economic activity will slow into the first quarter of 2026. If it comes in stronger than expected, the market could lose hope of a rate cut in the next three months. On the other hand, surprise underperformance could shock the market and raise fears of a significant slowdown.
What to Look Out For
Analysts’ consensus is that US Q3 GDP will grow 3.5%, slightly slower than the 3.8% reported for Q2. It would also match the Fed’s GDPNow forecast. One of the key focal points will be how trade affects the figures, since the April tariff announcement distorted the first-half data. Large imports pushed down Q1 data, as businesses built inventory. But as that inventory is exhausted, imports would likely increase, weighing on the headline GDP number. Also, the release of October US durable goods orders is expected to rebound to 0.5% from -0.3% a month earlier.
As the final major data batch, it could set the tone for the markets over the next couple of weeks. Amid low trading volumes, retail traders tend to react more positively to good data, so a surprise to the upside could have a bigger impact on the dollar. On the other hand, institutional traders will not want to have risky trades over the long holiday period, especially after disappointing data. These factors could lead to an outsized reaction this time around.
Other Data That Could Move the Market
At the same time, the Conference Board releases its December consumer confidence survey. Analysts’ consensus is that it will remain essentially unchanged at 88.7, compared with 89.0 in November. However, the survey also includes a survey on jobs, which could give additional insight into the labour market, and important component of the Fed’s thinking. Also, the release of October US durable goods orders is expected to rebound to 0.5% from -0.3% a month earlier.
