In the euro area, focus will be on the ECB meeting, which should in any case prove interlocutory. Few macro indicators are due out this week: data on the industrial sector in Germany (orders and output) should outline modest growth, and industrial output in Italy is expected to have rebounded in December. ……
Retail sales are estimated to have dropped sharply in the closing month of 2012. Possible an upward revision on the January’s services and composite PMIs. Lastly, consumer prices in Italy and producer prices in the euro area are expected to confirm their downtrend.
The week’s calendar of data releases is rather quiet in the United States. The non-manufacturing ISM should correct somewhat in January, while staying on high levels, consistent with solid growth in the services sector. The trade balance deficit is expected to contract in December, after rising significantly in November: exports should resume growing after slowing the previous month, also as a result of hurricane Sandy. Productivity in 4Q 2012 is estimated to have dropped, given the weak GDP data. The CBO’s Budget Outlook will lay the grounds for negotiations in Congress over the budget.
Monday 4 February
Producer prices should be down by three tenths in December, vs. -0.2% m/m the previous month. In all the main countries, prices decreased in the month. The years-on-year trend would stay stable at 2.1%. Surveys point to a further easing of pressures upstream of the production chain in the next few months.
Tuesday 5 February
The second reading of the services and composite PMI indices could see an upward revision, strengthening the rebound scored in January. The services and composite PMIs could be revised upwards by one and two tenths respectively, to 48.4. PMIs are still consistent with GDP contraction, but are signalling an easing of recession at the beginning of 2013.
Retail sales could be down by -0.8% m/m in December, after rising by one tenth the previous month. The rate was driven down by a -1.7% m/m drop in Germany, and a -2.2% m/m plunge in Spain. Sales in the quarter would therefore be down -1.5%, after recording a stable trend in the previous three months. Households’ confidence surveys are still failing to show any sign of a recovery in spending.
Italy. Consumer prices may have risen by one tenth in January (half the previous month’s rise). In terms of the harmonised EU rate, prices are expected to drop by 1.8% m/m due to seasonal effects, which the national index does not take into account. In the year, inflation would drop to 2.1% from 2.3% in terms of the NIC, and stay at 2.6% at the harmonised level. The monthly trend was probably affected by higher fuel prices and some tariff increases (gas, motorway tolls) despite a favourable seasonal effect. We believe there is room for a further drop in inflation in the months ahead.
The non-manufacturing ISM should correct somewhat in January, to 55.2 from 55.7 in December (a high since February 2012). The survey proved markedly positive in November and December, with the activity index on levels above 60, and the orders index above 58 for 2 months in a row. The estimated correction of the different components of the survey should be moderate, with no compromise to indications of robust growth in the services sector.
The CBO will publish its Budget and Economic Outlook for 2013-2023, updated with the measures taken at the start of the year to avoid the fiscal cliff. The Outlook will lay the grounds for negotiations in Congress over the automatic spending cuts and the 2013 budget.
Germany. Factory orders could rebound (by 0.5% m/m) in December, from a -1.8% m/m contraction the previous month. The year-on-year trend would stay negative (-1.2%), but mark a recovery from the low hit in June (at -7.6%). Foreign orders in particular should confirm their downtrend, with orders from other euro area countries at the fore.
Thursday 7 February
ECB meeting. We stick to our view that, despite the latest bank lending survey’s failure to prove reassuring, the ECB will not add monetary stimulus with the aim of restoring correct monetary policy transmission in peripheral euro area countries, and will want to reassert that it is now a matter of time before the improvement in sentiment filters through to the real economy, and subsequently to the credit trend.
Germany. Industrial production is expected to accelerate to 0.8% m/m in December, after growing modestly (by only two tenths) in November, and contracting in each of the three previous months. The year-on-year rate would in any case stay in negative territory, at -0.4% vs. a previous reading of -2.9%. Despite a potential rebound in December, output would close the quarter showing a sharp contraction (our estimate: -2.6% q/q); however, we expect a recovery early in 2013.
Productivity in 4Q 2012 should be down by -0.9% q/q, after surging in 3Q. The summer quarter figure should be further stepped up, in light of the upward revision of GDP. In 4Q 2012 the drop in output should be accompanied by a positive change in working hours, approximately in line with the trend recorded in the previous quarter. Unit labour cost should accelerate significantly, also driven by the early payment of incomes in order to avoid the planned tax hike at the beginning of 2013.
Friday 8 February
Italy. Industrial production is expected to have rebounded only partially in December (our estimate: +0.3% m/m) after dropping (on average by over one per cent) in each of the three previous months. The year-on-year change would stay deep in negative territory, at -10.5% unadjusted and at -5% adjusted by workdays. The reading would be compatible with a contraction of industrial output of slightly more than 2% q/q in the closing quarter of 2012, which would signal a marked decline in the same period for GDP as well.
The US trade balance deficit in December is estimated to have decreased to -47.5 billion dollars, from -48.7 billion the previous month. In November, the deficit had widened by 6.7 billion dollars, due to a drop in exports and to a sharp increase in imports. December should be shielded from price effects, and the estimated reduction of the deficit should be due to volumes. As regards exports, a sustained rise is expected, of close to +1%m/m, following the November decline (-3.5% m/m) made worse by the effects of hurricane Sandy. The trend of imports should stay positive, while slowing compared to the November surge (+3.8% m/m).
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