UMich Survey Likely Confirms Conference Board, Dollar Strength (page 1 of 2)

Australian Trade Balance (JAN) (00:30 GMT; 19:30 EST)

Consensus: -1300M
Previous: -1168M

Outlook: Australia's 45-consecutive monthly trade deficit string is ready to rack up its 46 in January with a A$1.3 billion shortfall. The unfavorable balance is expected to feel pressure from both the supply-side with businesses look to increase investments in machinery and equipment and the demand-side as Chinese demand cools.

While import pressures eased through the final months of 2005, primarily due to the continued contraction of energy prices, both subtle and sharp factors will play into January's inflow of foreign goods. The sudden increase in imports will come from the resurgence of crude oil prices that had drifty to monthly lows in December.

A momentous move higher in the commodity's price to near record levels is likely to factor into the notional measure of trade, yet its quick retracement the following month will likely subtract its influence as quickly as it came. More gradual for imports growth will be Australian businesses desire to expand their production capacity by purchasing more machinery and equipment from countries like Japan. On the other side of the scales is the unusual event of the Chinese lunar new years.

Being one of the largest consumer of Australian goods destined for outside the country, the observance of the holiday may have had a large affect on export numbers as it did on trade between China and Japan. The RBA is likely to ignore any sudden spikes in the trade deficit for its policy decision on its April 4th meeting, but continued strength in exports will likely provide a stable pin on growth that could allow for more attention to be paid to inflation.

Previous: The trade deficit in the fifth largest economy in the Asia-Pacific rim was halved in December as a 7 percent surge in exports placed the shortfall at a five month low. Sales abroad were predominantly paced by steady increases in both the demand and prices of Australian-mined metals which, along with other commodities, account for fully 60 percent of total exports.

Shipments of non-rural goods, including metals, jumped 10 percent from the period before. Leading the metal-driven increase were copper, aluminum, gold and zinc. And the destination for the majority of these shipments was China. Australia's shipments to China were worth A$8.91 billion over the final six months of the year in 2005.

Exports have long been dormant in terms of adding value to the economies overall growth, but the steady increase in demand for Australian-produced goods seems to finally be lending its fair share to growth, and not a minute to soon. Economic expansion recently slowed to a yearly low pace as the housing boom continues to deflate and consumer spending looses its vigor.

CIPS PMI Services Survey (FEB) (9:30 GMT; 4:30 EST)

Consensus: 57.1
Previous: 57.0

Outlook: Economists estimate that the Chartered Institute of Purchasing Manager's survey will show a strong service sector in the United Kingdom as the Institute's general index is expected to issue a reading of 57.1. February's predicted growth in services is very similar to actual figures in January, which although were lower than December's 20-month high, still represented rapid service sector growth.

Supporting the case for a strong index value is the fact that in last month's survey, managers pushed business expectations up to 75.1—the highest level since March of 2005.