In the euro area, preliminary estimates should point to -0.4% q/q contraction in euro area GDP, with national growth rates at -0.45% q/q in Germany, -0.2% q/q in France, -0.6% q/q in Italy, and -0.45% in Holland. …..
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On an annual basis, euro area GDP is estimated to slow to -0.7% y/y, from a previous reading of -0.6% y/y. The weak phase in the cycle is expected to continue, albeit at a slower pace, into the opening months of 2013. The trend of GDP is forecast to return into neutral growth territory already in the opening quarter of this year only in Germany. The latest monthly surveys suggest that the worst is over for the euro area.
Some important data releases are due this week in the United States. In January, retail sales are estimated to have moved little, cooled by the tax hike at the beginning of the year, and industrial output should show a modest change. Import prices in January are expected to be up, in the wake of higher energy prices. In February, the Empire index should improve, while staying just below zero, and consumer confidence should show a recovery following the January decline.
Monday 11 February
– France. Industrial output is estimated to have dropped by 0.2% m/m in December, after rising unexpectedly by +0.5% m/m in November. Energy production should provide a positive contribution for the second month in a row. We also expect a 0.6% m/m contraction in the manufacturing sector. In the quarter, output is forecast to be down by 1.7% q/q, from -0.3% q/q in the summer months. The INSEE survey of manufacturing companies has been yielding see-sawing findings, but slowed in January compared to the two previous months. The weakness of French manufacturing may continue into the opening months of this year.
Wednesday 13 February
– Euro area. Industrial output is estimated to have grown by 0.5% m/m in December, driven by a recovery in manufacturing in Germany and, to a lesser extent, in Italy. Output would close the quarter with a sharp contraction -2.2% q/q, from +0.3% q/q in the summer. The reading would be consistent with our estimate for a -0.4% q/q contraction in GDP at the end of 2012.
The indications provided by the latest monthly surveys point to a stabilisation, on low levels, of industrial activity in the euro area.
– Import prices in January are forecast up by 0.7% m/m, from -0.1% m/m in December. Once again, prices were probably pushed up by rising oil prices as of the last week in December, an upswing that is still under way. Natural gas prices are likely to have also contributed to the rise in the reading net of oil.
– Retail sales are estimated to have increased in January by 0.2% m/m, helped by a positive contribution from the auto component. Higher gasoline prices should also have supported sales net of autos, expected to show a 0.2% m/m rise. Sales will probably slow after two strong monthly performances at the end of 2012, as household spending will be impacted by the tax hike implemented at the beginning of 2013.
Thursday 14 February
– Euro area. The preliminary estimate for 4Q 2012 is expected to point a -0.4% q/q contraction in GDP, from -0.1% q/q in the summer months. Year-on-year, GDP growth is expected to slow to -0.7% y/y, from -0.6% y/y previously. While the initial estimate does not provide a breakdown of data by demand components, it is very likely that the drop was due to a slowdown in domestic demand, and to a temporary reduction in exports. The recession should continue into the opening months of 2013, although the pace of GDP contraction should be slower, at -0.1% q/q.
– Germany. GDP growth is expected to slow by -0.45% q/q, from +0.2% q/q in the summer months. In year-on-year terms, GDP growth is estimate to have slowed to 0.6% y/y, from a previous rate of 0.9% y/y. The slowdown was probably due to a contraction in exports, and to slowing household spending, combined with a weak fixed investment trend. As average growth in the year, GDP should be up by 0.9% (+0.8% net of calendar effects). The weak exit
from 2012 will affect annual growth in 2013, which we forecast at 0.6%. Already at the beginning of 2013, German GDP should return into neutral territory, and subsequently accelerate as of the second quarter of the year, driven by demand for capital goods from noneuro area countries.
– France. French GDP is estimated to have performed better than the euro area average in the closing months of 2012, and to show a contraction of just -0.2% q/q from +0.1% q/q in the summer months. Year-on-year, GDP should be down by 0.2% y/y, from the zero reading of 3Q 2012. As was the case in the rest of the euro area, the slowdown was probably due to a contraction in domestic demand, and in particular in consumption, which we see on the decline by around 0.2% q/q, two-tenths less than the estimated AE average.
– Italy. The recession seems to have deepened in the closing months of last year, and we expect the preliminary estimate to point to a -0.6% q/q drop in GDP, from -0.2% q/q in the summer months. Year-on-year, GDP contraction should come in at 2.3% y/y. Domestic demand, and in particular investments in machinery, are expected to have slowed further compared to 3Q 2012. The only positive contribution to GDP growth is expected to have come from foreign trade. In terms of the yearly average, Italian GDP should be down by 2.1%. We expect fiscal policy and financial conditions to continue representing a drag on domestic demand growth in 2013; however, GDP contraction should be smaller, at -1.0%.
Friday 15 February
– The NY Fed’s February Empire index should recover to -1 from -7.78 in January, marking the seventh consecutive month in negative territory. The survey was much poorer than the ISM not only in terms of the activity index, but also of the breakdown, generally pessimistic in January. We expect current conditions to improve gradually and to allow a return into positive territory by the end of 1Q 2013. Expectations on a 6-month horizon improved in January, to levels consistent with a modest increase in activity.
– Industrial production is estimated to be up in January by 0.2% m/m. The Employment Report highlighted a modest contraction in work hours in manufacturing, which should result in a flat output in the sector. However, relatively poor weather conditions are expected to have fuelled a rather sustained increase in the output in the utilities sector.
– Consumer confidence as surveyed by the University of Michigan in February (preliminary) is expected to show an improvement to 74.5 from a final January reading of 73.8. At the end of January, the survey had already pointed to a recovery, following the plunge in the preliminary reading, impacted by tax increases. As soon as a lasting improvement of labour market conditions is detected, confidence is likely to be restored to the positive path observed for the better part of 4Q 2012.
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