In the euro area, the EU Commission’s confidence index could rise in February, on values rather low but consistent with a less severe recession in 1Q. Inflation in the euro area should be confirmed at 2% in January, and the advance estimate should drop further, to 1.9% in February. …..
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In the euro area, the EU Commission’s confidence index could rise in February, on values rather low but consistent with a less severe recession in 1Q. Inflation in the euro area should be confirmed at 2% in January, and the advance estimate should drop further, to 1.9% in February. January data should indicate a contraction in spending in France, as opposed to a slight recovery in Germany. The trend of the M3 aggregate is expected to slow in January to +3.1%, from +3.3% y/y previously. The unemployment rate is forecast on the rise in Italy and unchanged in Germany and the whole euro area.
Rich calendar of data releases and events in the United States this week. Data should be positive on the whole. February business surveys (ISM, Chicago) and the January orders should be consistent with expansion of the manufacturing sector; auto sales should also come in positive in February. Households’ confidence is estimated to have recovered in February, after three months on the decline. Sales of new homes and construction spending in January should confirm their positive trends, despite some volatility on a monthly basis. Mr. Bernanke’s testimony before Congress should maintain a cautious stance, confirming indications that the securities purchase programme will continue, while also signalling forecasts for an improvement of the economy.
Tuesday 26 February
United States
Consumer confidence as surveyed by the Conference Board should improve in February to 61 from 58.6 in January. Mixed factors are weighing on confidence: the tax hike implemented at the beginning of 2013 and the recent rise in gasoline prices clearly act as drags; on the other, the positive trend of stock indices, the ongoing rise in home prices, and indications of improving labour market conditions are all supportive factors. Following the January decline, when the effects of the tax hikes at the outset of the year prevailed, we now expect a modest rebound of the confidence index, which in any case will remain well below its long-term
average (90.50).
Sales of new homes in January are estimated to have grown to 380k from 369k in December. Homebuilders’ confidence kept improving in the closing months of 2012, and points to home sales keeping up the average trend recorded in 2H 2012.
Bernanke will hold his half-yearly testimony on monetary policy before the Senate Banking Committee, and present the Monetary Policy Report.
Wednesday 27 February
Euro area
Germany. Import prices could be up by 1.1% m/m, with the year-on-year rate stable at 0.3% y/y in January. While the effective exchange rate has appreciated in the past six months, it is weaker than a year ago.
The M3 aggregate is estimated to slow by two-tenths in January, to 3.1% y/y. The trend of the M1 may slow further, as transfers from overnight deposits to deposits with one- or two- year maturities may continue, given the smaller appetite for liquidity shown by institutional investors in an environment characterised by low volatility. Therefore, we expect the M2 aggregate to increase further, whereas the exit from the M3 aggregate is expected to continue. Among the counterparts of M3, annual loans growth could stay approximately stable, as statistical effects will weigh on the trend of credit to businesses, while possibly
playing to the advantage of loans to households.
The EU Commission’s economic sentiment index is only expected to recover further in February, to 89.6 from a previous level of 89.2. The national surveys pointed to improving confidence in the manufacturing sector in France and Germany, which may be compatible with a confidence index in the industrial sector of -13, from -13.9 previously; based on the advance estimate, consumer confidence has also improved, to -23.6 from -23.9. Vice versa, confidence in the services could turn back down, more tightly bound as it is to the depressed trend of demand (to -10 from a previous reading of -8.8).
Germany. The households’ confidence index is expected to recover to 6.1, from 5.8 the previous month. Waning uncertainties over the debt crisis in the euro area, and quite good labour market resilience, should aid a brightening in the sentiment of households.
France. Consumer confidence is expected to prove broadly stable in February at 86.2, after recovering to 86 the previous month. The index is still on depressed levels, significantly below the long-term average, due to the generally uncertain environment and to worsening labour market conditions labour market.
Italy. The business confidence index drawn up by ISTAT for manufacturing companies could recover to 88.4, in line with last November, after dropping by seven-tenths in January. The index is still below its long-term average, and considering the see-sawing trend of the index between September and January, this would be at most a cyclical stabilisation on depressed levels, whereas a reversal is still not in sight for Italian manufacturing.
United States
Bernanke will hold his half-yearly testimony on monetary policy before the House Financial Services Committee, and present the Monetary Policy Report.
Thursday 28 February
Euro area
The second estimate should confirm a drop inflation in the euro area to 2% in January, from a previous rate of 2.2%. In the month, consumer prices should be down by 1% m/m, largely due to negative seasonal effects. Core inflation is expected to drop to 1.4% from 1.5% previously.
France. Consumer spending is expected to contract by 0.4% m/m in January, after stagnating in December. Data on motor vehicle registrations point to a slowdown in auto sales. Also, spending on durable goods may retrace at least in part following the previous month’s sharp increase. On the other hand, spending on clothing and apparel should recover. If confirmed, the rate would leave the quarterly trend on course for a -0.5% q/q decline in March, from – 0.2% q/q in December, suggesting that household spending, which was resilient at the end of 2012, could slow again in the opening months of the year.
Germany. We cannot rule out an increase in unemployment numbers in February by five thousand units, after two monthly declines. However, the monthly rise would not be sufficient to drive up the unemployment rate, which we see stable at 6.8%. The indications provided by the IFO and EU Commission surveys point to a stabilisation of German labour market conditions, although a temporary rise in unemployment to al 7.1-7.3% could be possible as a result of the past weakening of the cycle.
Germany. Data from the Laender should show a 0.6% m/m rise in consumer prices in February, after the previous month’s -0.5% m/m drop, largely due to seasonal factors; the contribution of the energy component should prove to have been broadly neutral this month. Inflation is estimated to drop by two-tenths, to 1.5% at the national level and to 1.6% in terms of the harmonised rate.
Germany. Retail sales could show a modest recovery in January (+0.5% m/m. vs. -1.6% m/m in December). The outlook for consumption in Germany remains much stronger than for the rest of the euro area, given the strong growth of real disposable income, and the moderately positive indications on the economic cycle.
Spain. The detailed estimate of 4Q 2012 GDP should confirm a contraction of 0.7% q/q and 1.8% y/y. We expect domestic demand to have made a markedly negative contribution (- 1.3% q/q), dragged down in particular by consumer spending, which we forecast at -1.3% q/q from a previous rate of -0.5% q/q. Net exports are estimated to have made a positive contribution, by 0.5% q/q, due however to a sharper contraction in imports than exports. We expect the recession in Spain to continue at least at the same pace in the opening months of 2013.
Spain. The advance e stimate should point to stable inflation at 2.8% in harmonised terms, and to a one-tenth rise of the national rate, to 2.6% y/y. Spanish inflation is forecast to drop gradually towards 2% by the early summer, as pressures from the energy component wane. As of August, inflation is estimated to stay below 2%, as the VAT hike will no longer affect the year-on-year comparison.
United States
Orders of durable goods in January are estimated to have declined by -3.5% m/m, after rising by 4.3% m/m in December (revised from +4.6% m/m). In December, the sharp upswing was largely due to the civil aviation and defence components: these two items (the former especially) should also be responsible for the January drop. Orders of capital goods net of defence and aircraft should be up by around 1% m/m, in light of the positive trend of the orders component of the January ISM index (on the rise to 53.3 from 49.7 in December). Data should point to an expansion of activity in the manufacturing sector in 1Q 2013.
The second estimate of 4Q 2012 GDP should bring an upward revision to +0.4% q/q ann. compared to an advance estimate of -0.1% q/q ann. Factors of opposite sign will affect the second estimate. Foreign channel, fixed business investments, residential investments and, very limitedly, consumer spending, should all be revised upwards, although the positive contribution of inventories by around 1.3pp should be significantly offset.
The Chicago PMI is estimated to correct in February to 54.5, from 55.6 in January. Last month the index rose by 5.6 points, with output surging to over 60, and orders and employment to over 58. In February, the output and orders components should normalise, correcting towards 55. The prices paid component should stay above 60. The indications provided by the survey should continue to point to solid expansion, in the auto sector in particular.
Friday 1 March
Euro area
The second reading of the February manufacturing PMI should confirm the preliminary estimate, little changed at 47.8 (from 47.9 in January). The manufacturing sector survey was considerably more encouraging than the services survey, which revealed a surprise deterioration in confidence in the month. The recovery in new orders should be confirmed (hitting a new two-year high), fuelled principally by foreign orders. The first reading of the Italian PMI index could show a decline, to 47.5 from 47.8 the previous month.
The advance estimate for February should point to lower inflation in the euro area, to 1.9% from a previous level of 2%. Inflation the euro area is expected to drop in March to 1.7%, and then to rise back towards 2% by July. It should then fall back below that threshold by the end of the summer.
The unemployment rate should stay at 11.7% for the fourth consecutive month in January. The jobless rate could be down in Germany, as opposed to a rise in most other countries, with the periphery at the fore. The unemployment rate will continue to rise for at least the next six months.
Italy. Consumer prices are expected to come in one-tenth higher in February (half as much as in the two previous months). Based on the harmonised EU index, on the other hand, prices should be down by one-tenth (after contracting by a hefty 2% m/m in January). Inflation will slow by three-tenths (from 2.2% to 1.9% at the national level, and from 2.4% to 2.1% in terms of the harmonised index). There seems to be room for a further decline of the CPI in the months ahead.
Italy. Unemployment is estimated to have risen again in January, after staying flat for three months. We expect a one-tenth rise, to 11.3%. Indexes referred to temporary redundancy schemes and unemployment benefit applications, as well as a plunge in hiring intentions among manufacturing companies, all point to renewed labour market weakness in the opening months of 2013. The quarterly survey of workforces should place the jobless rate at 11.2% in 4Q 2012 (from 10.6% the previous quarter), placing the 2012 average at 10.6% (from 8.4% in 2011).
Italy. Annual national accounts and public finance data should indicate a -2.2% contraction in real GDP, with the nominal rate down by -1.2% in 2012. Unadjusted data should not differ greatly compared to the figures adjusted by workdays, as 2012 only had one workday more than 2011. The public administration deficit is expected to amount to 2.9% of GDP (with some risk of a higher rate by one-tenth).
United States
Personal spending in January is estimated to have increased by +0.2% m/m, based on the weak indications provided by retail sales. Personal income levels should contract sharply, by – 2.4% m/m, from +2.6% m/m in December. Both December and January were affected by extraordinary factors. In December 2012, income was inflated by early dividend payments, aimed at avoiding higher expected taxation as of January 2013. In January, the payroll tax hike from 4.2% to 6.2% will weigh negatively; the higher tax rate on high incomes should only have repercussions on disposable income, estimated to drop more sharply than overall income. In January, the savings rate should correct from 6.5% in December, driven by the extraordinary dividend payments.
Construction spending in January is forecast to rise by 0.1% m/m, after rebounding by +0.9% m/m in December. The non-residential and public components should correct in January.
The manufacturing sector ISM should drop slightly in February, to 52.5 from 53.1 in January. The first indicators referred to February are solid (Empire, Philly Fed), but the rise in the regional surveys mostly consists of the closing of the differential that had opened a few months earlier compared to the national survey. On a par with the other surveys, the ISM should that growth is accelerating already in the opening months of 2013.
The final reading of the February University of Michigan consumer confidence should move further up, albeit only slightly, to 77 from 76.3 of the preliminary estimate, as the effects of January’s tax increases wane.
Auto sales in February should improve to 15.3 million, from 15.2 million in January, resuming the uptrend of 2012, interrupted by volatility generated by Hurricane Sandy. The February reading could be held back in part by the suspension of activity on the East Coast, due to snow storms.
Appendix
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