In the euro area, focus will be on the outcome of the Eurogroup and Ecofin meetings at the beginning of the week. The…
Monday 23 January
– The Eurogroup will meet to prepare the forthcoming European Council on 30 January. The final version of the “fiscal compact” draft, prepared over the past few weeks, should be approved (with few changes, in our view). The issue of the leverage of the EFSF will also be tackled, and the implications of S&P’s recent downgrade discussed, in addition to laying out a roadmap for the strengthening of the fund’s resources, which should take place by the end of March, ahead of the launch of the new ESM (in June). Another topic of discussion will be the issue of the second bailout package to Greece (conditioned to an agreement being reached on Private Sector Involvement).
– France. Business confidence, as measured by the INSEE index, may stabilise at 94 in January, below the long-term average (100). This would be the first time the index avoided a monthly drop since last June; we expect the downtrend to at least be interrupted by signals of a stabilisation of the financial crisis. It should also be noted that the corresponding survey carried out by the Bank of France pointed to a marginal improvement in December (as opposed to a two-point drop of the INSEE idnex).
Tuesday 24 January
– The initial January PMI readings should confirm the rebound recorded in the previous two months. However, the main indices should in any case stay in recessive territory. We estimate a two-tenth rise in the composite PMI to 48.5, on the back of an improvement in the services sector in particular (to 49.3 from 48.8), as opposed to a broadly stable manufacturing index (47 vs. 46.9). If the financial crisis shows signs of stabilising, the cycle low could be reached in Q1 2012.
Wednesday 25 January
– Germany. The IFO index should rebound for the third consecutive month in January, to 108.7 from 107.2 in December, according to our estimates. The improvement would mostly be tied to expectations component (up to 101.1 from 98.4), while assessments of the present situation should remain broadly stable (in line with the previous three months) at 116.8. We believe Germany should be able to avoid a recession, thanks to a still expansive monetary and
fiscal conditions in the euro area’s leading economy.
– President Obama will hold the “State of the Union Address”, laying out the guidelines for his re-election campaign leading up to the autumn presidential vote.
– The FOMC meeting will be followed by Mr. Bernanke’s quarterly press conference. The meeting should bring the announcement of deep changes in the communication strategy. In addition to the usual macroeconomic projections, the Fed is also expected to publish explicit numeric targets to define its mandate in the medium term. Also, the monetary policy deemed appropriate by the 14 present participants in the FOMC meeting should be disclosed, with indications on the likely timing of the first interest rate hike, and projections for the fed fund rate between the end of 2012 and 2014. The message should be expansive, and rates probably be indicated as stable until well into 2014. The new communication strategy lays the groundwork for QE3: the macro projections and explicit targets should outline a relatively high probability of the Fed’s readiness to intervene with further monetary stimulus in the not-toodistant future.
Thursday 26 January
– Italy. January consumer confidence should come in close to its recent lows. Our forecast is for an index of 92, from 91.6, which marked an all-time low in the 15-year long data series. Confidence was impacted by the effects of the financial crisis (and of the austerity measures) on household savings opportunities, as well as by the perception of persistently high inflation, both in the past 12 months and next year. Household confidence is already compatible with a
contraction in consumption in 2012.
– December durable goods orders should prove to have risen at a sharp pace, of +3% m/m, driven by a surge in the volatile civil aviation segment. Net of transport items, orders are expected to be up by 1% m/m. The orders component of all manufacturing sector surveys point to an acceleration; the production trend in the manufacturing sector was also strong in December.
– Sales of existing homes in December are forecast on the rise to 325k from 315k in November. All real estate sector indicators are improving, including those tied to construction. The construction sector confidence survey has brightened considerably, yielding positive indications on views on the present and future sales trend. What’s more, December enjoyed particularly favourable weather conditions.
Friday 27 January
– The M3 monetary aggregate is expected to be up by 2.2% y/y in December, after dropping unexpectedly by 2% in November. Last month’s decline was due a statistical effect tied to the substantial interbank transactions with central counterparts in November 2010, net of which the monetary aggregate would have increased slightly. The 3M moving average would drop to 2.3% y/y as a result, from 2.5% y/y in November.
– GDP growth in Q4 2011 is expected to be up by 2.8% q/q annualised. Consumption is expected to show a 2.2% q/q annualised increase, the best result in 2011. Fixed investments by enterprises should slow to 7% q/q annualised, after a brilliant Q3 (+15.7% q/q ann.). The foreign channel is expected to make a marginally negative contribution. Public sector spending should be a drag on growth, owing to the end of the Iraq troop deployment. Inventories should instead contribute positively to growth.
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