In the euro area, preliminary estimates for March should place German inflation at 1.6%, on the decline from 1.8% the previous month, and euro area inflation at 1.7%, from 1.8%. The unemployment rate is expected stable at 11.9% in terms of the euro area average, and at 11.7% in Italy, but this is only a pause in the upward trend……….……
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Busy calendar of data releases in the United States. The Chicago PMI should stay on high values in March, and consumer confidence is expected to feel the effects of the enforcement of the automatic spending cuts. February data should prove to be positive, with durable goods orders, personal spending, and personal income all on the rise; new home sales are estimated to have dropped following their sharp rebound in January, while keeping up a positive trend. The final 4Q 2012 GDP growth estimate should be revised upwards again.
Orders of manufactured goods in Germany should recover part of the ground lost in January. Retail sales in the euro area are estimated to drop by 0.5% m/m in February, after surging in January. The underlying trend of consumer spending remains weak.
A host of economic data releases are due this week in the United States. March data should stay positive, albeit with uncertainty on the rise as a result of the enforcement of the automatic spending cuts provided for by the Budget Control Act. Non-farm payrolls should be up at a solid pace, broadly in line with the February trend, and the unemployment rate is estimated to stabilise at 7.7%. The manufacturing and non-manufacturing ISM indices should change little in March and keep pointing to an expansion of activity in the private sector. Motor vehicle sales should be in line with February. Construction spending in February is forecast to rise back, after correcting in January. The trade deficit is expected to stay flat vs. January, with both exports and imports on the rise.
Monday 1 April
– Construction spending in February is forecast to rise back by +1% m/m, after dropping by -2.1% m/m in January. The residential construction component should make the strongest contribution, as has also been the case in recent quarters. February housing starts rose at a more moderate pace compared to the sharp increases seen over the previous months, signalling a slowdown also in the pace of growth of construction spending. The public sector should continue to contract.
– The manufacturing ISM is estimated to change little in March, showing a modest decline, to 53.6 from 54.2 in February. The index’s rapid ascent in the past two months makes a pause likely, with a correction in output, orders, and unemployment, currently at their highest levels since April 2012. The Philly Fed and Empire indices gave mixed indications. The ISM survey should in any case stay compatible with sustained growth in the manufacturing sector.
Tuesday 2 April
– Euro area. The second reading of the manufacturing PMI should confirm a decline to 46.6 in March, from 47.9 the previous month. PMI survey data suggest that the French manufacturing sector (43.9) is lagging even the Italian (45.8) industry. Germany still tops the table with an index of 48.9, albeit down from 50.3 in February.
– Euro area. The unemployment rate is expected to stay flat at 11.9% in February, after rising the previous month. Confidence surveys are still not showing any sign of a reversal in the employment trend in the euro area periphery. Given the usual lag compared to the employment cycle, euro area unemployment could continue to rise, peaking at 12.4% early in the summer.
– Italy. Unemployment is forecast to come in stable at 11.7% in February, after rising by fourtenths in January. However, this is only a hiatus, as employment prospects show no sign of improving, and the contraction in the workforce tied to the increase in inactive workers seems to have stopped. Our base-case scenario places the unemployment rate peak at 12% at the end of 2013, although the January acceleration outlines a risk of that level being reached earlier than expected.
– Germany. Data from the Laenders should point to a +0.3% m/m increase in consumer prices in March, with inflation falling to 1.3% y/y from 1.5% y/y the previous month. As regards the harmonised measure, inflation is expected to drop to 1.6% y/y from 1.8% y/y in February. German inflation, on the other hand, is forecast to rise back to 1.8% in June, and to drop back towards 1.1% – 1.2% in the autumn.
– Motor vehicle sales in March are expected to come in stable at 15.3 million units, in line with February. Sales are still on a solid uptrend, thanks to improving employment levels, recovering net wealth, and to the fact that the average age of the existing auto stock is especially high.
Wednesday 3 April
– Euro area. The preliminary estimate points to a further drop in euro area inflation in March, to 1.7% from 1.8% the previous month. Inflation in the euro area was 2.2% y/y at the end of 2012. The decline is explained by a moderation of the energy component and by a favourable base effect. The average euro area inflation rate is forecast at 1.7%, from 2.5% in 2012, and risks to the forecast are skewed to the downside. The significant slack in the economy is compressing the prices of goods net of the energy component.
– The March non-manufacturing ISM should be unchanged vs. February at 56. The survey was markedly positive in February. In March, both orders and employment should retrace moderately, after soaring to very high levels, whereas the output component could rise further. The survey should confirm expanding activity in the private sector, despite enforcement of the automatic spending cuts and fiscal policy tightening at the federal level.
Thursday 4 April
– Euro area. The ECB meeting should leave interest rates unchanged and bring no developments in terms of potential non-standard measures. For the time being, beyond ELA and full allotment at refinancing auctions, there are no instruments of immediate activation available
– Euro area. The second estimate of the services PMI should confirm the index at 46.5 in March, down from 47.9 in February. The composite PMI index should be confirmed at 46.5, on the decline from 47.9 the previous month. The composite index is back to last November levels and just eight-tenths above the low hit last October. In general, the PMI surveys suggested a blander recovery in economic activity than the national surveys. In the opening three months of the year, the composite PMI index hovered at around 47.6 on average, vs. 46.4 at the end of 2012, and is therefore pointing to a contraction in euro area GDP at the beginning of 2013, albeit less severe than in 4Q 2012 (-0,6% q/q).
Friday 5 April
– Euro area. Retail sales should decline by -0.5% m/m from +1.1% m/m in January, driven by Germany. In February, sales contracted in Germany and Italy, and fell further in Spain, albeit at a slower pace than in January. The underlying trend of consumption in the euro area remains weak, due to the uncertain environment and to the slowdown in disposable income. We expect a contraction in household spending in the opening months of 2013 as well (-0.4%q/q).
– Germany. Orders of manufactured goods are expected to be up by 1.8% m/m, after the unexpected January setback (-2.5% m/m). Sentiment surveys have pointed to a sharp recovery in the order book at the turn of the year. A recovery in the orders of machinery from the rest of the euro area would represent an important signal for the German investment cycle and for demand addressed to the rest of the euro area.
– The February trade balance should show a deficit of -44.8 billion dollars, from -44.4 billion in January. The data should reveal a recovery in exports and imports, with lingering risks of volatility tied to the effects of the Chinese new year on trade flows in the opening months of the year.
– Non-farm payrolls should be up by 200k in March, vs. +236k in February. New jobless claims kept declining, and in the March survey week were 336k compared to 366k in the same week in February. However, March data should start to feel the effects of the enforcement of the Budget Control Act’s automatic spending cuts, especially on the Department of Defence’s budget and on employment in the sectors of the economy related to the defence sector. The unemployment rate is expected to stabilise at 7.7%, with the participation rate also stabilising, after dipping back down in February. Hourly wages are estimated to increase by 0.2% m/m.
Fiscal policy is the main factor source of uncertainty weighing on the growth and employment outlooks, in a phase in which aggregate private demand is accelerating.
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