In the euro area, data for March should show a slowdown in industrial in Italy, France, and for he euro area as a whole. We expect first estimates for 1Q 2011 GDP growth to confirm a trengthening of the cycle, with Germany and France leading the way..…
On the other hand, GDP rowth is expected to be just above zero in Italy and Spain, whereas smaller peripheral EU ountries will prove to be still grappling with the crisis.
In the United States, April data should confirm strong upside pressures on the headline CPI, PPI and import prices indices, as a result of rising commodity prices. April retail sales will be partly inflated by price effects. Household confidence should recover somewhat in May, for the second month in a row, after hitting a low since November 2009 in March. Lastly, April trade balance data is expected to show a further deficit increase.
Tuesday, 10 May
France. Industrial output should have expanded by 0.3% m/m in March (from 0.4% m/m in ebruary). As a result, output would be up by a robust 2.1% q/q (from 1% q/q three months arlier), and 4.6% y/y (slight slowdown from 5.6% y/y in February). Monthly surveys point to a ontinuation of the trend in the next few months.
Italy we expect industrial output to have expanded by 0,3% mm/ in March half the pace ecorded in February. On the year, output is set to slow to 1,6% y/y from 2,3% y/y, but hould accelerate to 3,9% y/y when adjusted for working days. Despite the February and arch (likely) increases, output is set to have stagnated on the quarter due to the weak entry oint into the year. We look for an increase in quarterly dynamics in the Spring.
Import prices are expected to have grown again in April, but at a slower pace than in March, to 1.5% m/m from +2.7%. Once again the rise in oil prices (which we estimate at +4.2% /m) will explain a large portion of the rise in import prices. Import prices ex – energy are seen rising 0.7% m/m. In annual terms, import prices would accelerate to 10.1% from 9.7% y/y. Export price are estimated to have slowed to 0.5% m/m (from 1.5% m/m), and to 8.9% y/y (from 9.5% y/y in March).
Wednesday 11 May
The US trade balance deficit should widen to USD 47Bn in March, from EUR 45.8Bn largely as a result of higher import prices (+2.7% m/m) tied to energy price increases (imported oil +10.5% m/m), as opposed to a more moderate rise in export prices (+1.5% m/m).
Thursday 12 May
France. In April, consumer prices are estimated to be up by 0.2% m/m (with some upside risk), after rising by 0.8% m/m in March (0.9% m/m harmonised). Inflation should stay at 2% y/y on the national measure, but could drop by one-tenth to 2.1% y/y on the harmonised index.
The price increases would once again be driven by higher energy and food prices, while the core CPI could increase by just one-tenth in the month, staying on very modest levels (just above 1%) on an annual basis.
Industrial output in the euro area could be up by 0.2% m/m in March, slowing from 0.5% m/m in February. This would be the sixth consecutive monthly increase. Output would continue to grow at a solid pace in the quarter, despite slowing to 1.2% q/q from 1.9% q/q in at the end of last year. In annual terms, production output would slow to 6,o% from 7.5% the previous month. Monthly surveys point to a continuation of the recovery phase also in the Spring.
Retail sales are expected to have grown by 0.5% m/m in April, vs. 0.4% m/m in March. This would be the tenth consecutive monthly rise. Excluding auto, retail sales could be up by 0.7% m/m, vs. 0.8% m/m in March. Weekly sales data were mixed, with positive indications coming from Redbook (+1.3% m/m) and negative ones from ICSC (-0.8% m/m). In any case, expected sales growth in April will be at least in part inflated by the price effect.
The April PPI is estimate to be up by 0.8% m/m, from 0.7% m/m in March. The core PPI should rise by 0.3% m/m, in line with March. Energy prices will continue to explain a large part of the price increases, forecast to be up by 2% after a 2.6% rise in March. Intermediate goods prices may continue to slow, to 1% m/m, from 1.5% m/m in March. Commodity prices are expected to rise back, after dropping in March (-0.5% m/m).
Friday 13 May
Preliminary 1Q 2011 GDP growth estimates should point to a strengthening of the cycle in almost all countries compared to Q4 2010. Germany should be confirmed outperforming the average, having expanded (on our estimate) by +1% q/q (+4.4% y/y). Growth should be driven by a rebound in the construction industry, after the winter weakness related to cold weather, but also by a “genuine” recovery of investments in machinery, and a persistently upbeat export trend. France should also post strong growth (our estimate: +0.8% q/q; +2% y/y), thanks to an acceleration in corporate investments and to a reversal of the exceptionally negative impact of inventories in the previous quarter (and despite the likely slowdown of household consumption). GDP growth will be less brilliant in Italy and Spain (our forecast: +0.2% q/q for both countries, with some downside risk in Spain’s case especially). It is almost pleonastic to remind readers of the downside risks tied to the countries grappling with structural crises (Greece, Portugal, Ireland). In any case, driven by the major countries, euro area GDP could grow by 0.7% q/q (vs. 0.3% q/q in the two previous quarters), thus accelerating at a rate of 2.3% in annual terms, vs. +2% in YE10.
The March CPI is expected to come in higher at 0.6% m/m, from 0.5% m/m in February. Core inflation is estimated to be up by just one-tenth, in line with the previous month. Annual inflation would rise to 3.1% a/a at the headline level (from 2.7% in February), and to 1.3% ex food and energy (from 1.2%). In the month, energy prices should accelerate to 4.6% m/m, driven by the +7.6% rise in petrol prices. Clothing & apparel prices, on the other hand, could be down for the third month in a row; the trend in the education sector is expected to stay sustained (+0.4% m/m), and imputed rentals should keep up the one-tenth rise trend, as was the case over the previous six months.
Household confidence, as surveyed by the University of Michigan in May (preliminary) should show a (modest) recovery for the second month in a row, to 70.2 from 69.8 in April (after crashing in March to 67.5). Inflation expectations will be very important, as they have taken on increasing importance in the rhetoric of the Fed: in April 1M expectations were stable at 4.6% (a high since August 2008), and 5Y expectations dropped to 2.9% (from 3.2% in March, that had also marked a high since August 2008).
– Producer prices are expected to be up 0.6% mom, largely on the increases in energy prices (and to a lesser degree in intermediate goods prices). The year-on-year trend is expected to be steady at 6.6% (with some upside risks). The input price indices in the PMI still signal upward pressures at the upstream end of the production chain.
– Auto sales should remain virtually steady at 13.1M units ann. in April, vs. 13.06M in March.
According to JD Power estimates based on the survey of dealerships in the first weeks of the month, April recorded further growth in sales to households, vs. a correction in sales to firms.
The sector estimates are for a slowdown in the pace of sales in the second half of the month, as the constraints build on inventories from a shortage of parts due to the earthquake in Japan. Late April and May sales should see a slowdown, the duration of which will depend on the resumption of activity in Japan and the emergence of alternative suppliers.
– The second estimate for the service sector PMI might confirm the first reading (56.9, down slightly vs. 57.2 in March). Consequently, given the final reading of the manufacturing indices, the composite PMI might be revised down by two-tenths to 57.6 (steady vs. the previous month). The first estimate for the minor countries will confirm that the divergence between core and peripheral countries is far more marked in services than in industry.
– Retail sales should have fallen by 1,0% m/m in March as data from Germany, Spain, Italy and France hint to a generalised weakness possible the late Easter relative to last year distorted the March reading too. Sales would leave the quarter dynamics at three tenths below the December level, confirming that a meaningful recovery in household demand is not yet imminent.
– The ADP estimate of new non-farm payrolls in the private sector should be steady in April, 200k off the March estimate of 201k.
– The non-manufacturing ISM should rise to 58 in April, after correcting to 57.3 in February (after two months above 59). The Beige Book reports weak retail sales in a couple of districts, and modest rises in the other areas; by contrast, a general improvement is recorded in business related services; services in the real estate sector are weak, and stagnant in financial services. Thus, overall a moderate improvement is anticipated, with activity and employment both up on the March levels of 59.7 and 53.7 respectively.
– We expect the ECB will confirm further normalisation of monetary policy. The next hike will come before the summer, most likely in July. The one after that should arrive in the autumn.
– Productivity growth in the first quarter should slow to +0.5% qoq from 2.6% qoq at end-2010.
– Germany. Industrial production might fall slightly after two months of strong gains (1.8% mom avg. in January-February). We expect output to fall -0.2% mom, held back by construction after two boom months (+35.2% mom in January and +3.4% mom in February).
The year-on-year movement would remain robust, despite slowing to 9.8% from 14.8%. This would still be only a natural reaction after the boom of the previous months and the trend for German industry will remain very expansionary.
– Non-farm payrolls are expected to be up 200k in April, roughly in line with the average for the last two months (205k). Private non-farm payrolls should be up 220k. Since November 2010, with the end of the census effects, the private sector has created on average 27k more jobs than the change in total payrolls (14k in March): the spread due to the loss of jobs in the state and local public sector should continue for a long while yet. The manufacturing sector should see some moderation in the pace of job creation, while the improvement in services should continue. The unemployment rate should remain unchanged at 8.8%. Hourly wages were unchanged in March: in April the month-on-month movement should be in line with last year’s trend, + 0.2% mom.
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