In the euro area, the EU Commission’s index for June should confirm the risks of a slight contraction in euro area GDP in Q2 2012…..
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Busy calendar of events this week in the United States. Data should indicate a stabilisation of the recovery on slower levels than in 1Q 2012. In May, orders and deliveries of capital goods should offset the April corrections; new home sales are expected to stay broadly unchanged; personal spending should drop in nominal terms, as opposed to a very small rise in personal income. In June, consumer confidence and the Chicago PMI index are estimated to stabilise, after dropping in May.
Monday 25 June
United States
New home sales are estimated to be up marginally in May to 350k from 343k in April. Housing starts have not expressed a clear trend in recent weeks, following the bout of volatility tied to favourable weather conditions in Q1 2012, although the builder confidence index rose sharply in May.
Tuesday 26 June
United States
Consumer confidence, as surveyed by the Conference Board, should stabilise in June at 65, from 64.9 in May, after three consecutive slumps. The Bloomberg Comfort weekly confidence index has scored a modest recovery in recent weeks; the sharp correction of the University of Michigan confidence index in June followed a surprising rise in May. All confidence indices have been on a downtrend since March, accompanied by a slowdown in household spending, despite the correction of gasoline prices: this is mostly due to weak labour income and fiscaluncertainty.
Wednesday 27 June
Euro area
Germany. Consumer prices should be stable in June on a monthly basis. Data on petrol and combustible gases point to a negative contribution of the energy component. As a result we see inflation declining by one-tenth in terms of the national measure, to 1.8% y/y, while staying put at 2.2% y/y at the harmonised level.
Italy. Business confidence in the manufacturing sector is expected to drop further in June (to 85.3 from 86.2 the previous month), although not as much as in recent months. The index is now one-and-a-half standard deviation below the long-term average, although it remains higher than the low hit at the beginning of 2009. The drop in domestic demand (as opposed to more resilient foreign demand) had pushed enterprises to revise downwards their production plans in May. This trend may be confirmed this month. Expect industrial activity to remain in negative territory until the end of 2012-2013 due to the slowdown in global trade (and now also to Germany’s loss of steam), and to sluggish domestic demand, held back by fiscal consolidation measures, uncertainty on the markets, and by the effects of the earthquake that hit the North East of the country in the spring.
United States
Orders of durable goods in May are forecast to have slipped slightly, by -0.1% m/m, in light of the weak performance of the civil aviation sector. Net of the transport item, orders should show a 0.5% m/m increase (from -0.9% m/m in April). Orders and deliveries of capital goods net of the defence sector are expected to rise back, after correcting in April (-0.2% m/m and – 0.5% m/m respectively). In May, the orders component of the ISM manufacturing index rose for the second month in a row, even if regional surveys were less positive.
Thursday 28 June
Euro area
The European Council meeting starts on June 28 and ends on June 29. The meeting is eagerly awaited to see if there is consensus necessary to initiate a process of greater integration in the Eurozone, according to the program should be presented by the top EU authorities (ECB, European Commission, Eurogroup President, EU President). The contents of the so-called roadmap are not yet known, but it should cover several areas: banking union (the transfer of responsibility for supervision and crisis resolution from States to one or more European organizations), fiscal union, political union. Last Thursday, the Eurogroup meeting offered no signs of note. The situation of context is not among the worst imaginable, thanks to favourable outcome of the elections in Greece. However, the refinancing costs in Spain rose in the latest auctions and Italy will offer medium/long term paper the same day of EU Council. The context may deteriorate rapidly in the absence of results.
The economic sentiment drawn up by the EU Commission is expected to be down to 90 from 90.6. We expect a widespread loss of confidence. The survey should therefore confirm that the euro area fell back into (a slight) recession in the spring months.
Spain. Consumer prices are estimated to have dropped by 0.2% m/m, as a result of lower energy prices. Inflation may stay flat at 1.9%y/y, as opposed to a 1.8%y/y drop in harmonised terms. Spanish inflation is expected to stay just above 2.0% y/y until the end of 2012.
Italy. Consumer prices are expected to have risen by 0.1% m/m in May, once again on pressures stemming from petrol and fuel prices. In terms of the harmonised level, prices are estimated to be up by 0.2%m/m. Inflation should stay put at 3.3% y/y at the national level, and at 3.7%y/y in harmonised terms. In the second half of this year, easing pressures from energy components will be more than offset by the 2% VAT rate hike in October, and inflation will stay close to its current levels as a result.
Germany. In June, unemployment may remain stable or rise marginally (+5k unemployed), based on monthly survey hiring intentions. The unemployment rate is in any case expected to prove stable, in line with May at 6.7%. Unemployment in Germany, according to Bundesbankestimates, is close to its natural rate. Barring an increase in immigration flows, the participation rate is unlikely to increase significantly. In our view, the cyclical slowdown, if contained in depth and duration, should not reverse the virtuous trend of the German labour market
United States
The final estimate of 1Q GDP should be revised upwards to 2% q/q ann. from 1.9% q/q ann. A stronger contribution from the foreign channel (as a result of slower imports) should more than balance a modest downward revision of consumption and inventories.
Friday 29 June
Euro area
The preliminary inflation estimate should point to a stable rate in June, at 2.4% y/y, thanks to easing pressures from the energy component. Consumer prices are estimated to drop by 0.1% m/m on easing energy component pressures. Euro area inflation could rise back marginally in the summer, closing the year at 2.2% y/y and returning below 2% at the beginning of 2013.
The trend of the M3 aggregate should stay close to May’s levels at 2.5% y/y, with the 3- month moving average at 2.7%. We expect slower outflows from overnight deposits, and a slight recovery in lending to enterprises.
Germany. We expect a 0.6% m/m drop in retail sales in May, from -0.2% m/m in April, given the firm indications of weakness from the IFO and household confidence indices. The consumption trend should recover in the course of the summer, based on the encouraging trend of labour income.
France. Retail sales in May are expected to have stayed unchanged month-on-month and to have risen slightly on an annual basis (+0.1%), vs. +0.6% m/m and +0.4% y/y in April. Auto sales should support the overall consumption figure, and apparel sales are also expected to be on the rise after contracting significantly in the past few months. Consumption should in any case be down in Q2 2012, after surprising on the upside in the opening three months of the year. The trend of retail sales should in fact be cooled by consumer confidence, held back by the fiscal tightening under way and the exacerbation of the sovereign debt crisis in the euro area.
United States
Personal spending in May should come in unchanged in nominal terms, and 0.2% m/m stronger in real terms. Gasoline prices held back nominal spending, while retail sales revealed weak trends also for other items in the goods category. Services are still growing at a very modest pace indeed. Personal income is expected to be on the rise by 0.1% m/m, with a very weak labour income component, offset by improvements for other components. Households stepped up consumption in the opening months of the year, despite weak income performance: the decline in the savings rate, underway since June 2010 (5.8% in June 2010), and which has accelerated sharply since the end of 2011 (3.4% in April 2012), should be followed by a modest uptrend in the next few quarters. Consumption in 2Q 2012 is estimated to slow to 1.8% q/q ann., and should growth at modest rates, of close to 2% q/q ann. in the remainder of the year. The consumption deflator is forecast to drop by -0.2% m/m (1.5% m/m).
The Chicago PMI should stabilise in June at 53 from 52.7 in May. The May index had recorded a significant drop in the production, orders, and back orders components, with the auto sector suffering a decline in sales and in production in the month. The Beige Book points to stable activity in June in the Chicago district, with some concern over the fiscal outlook, albeit against a background of on-going modest growth. Consumer confidence measured by the Univ. of Michigan in June (final) should stabilize at 74.5, close to the level seen with the preliminary survey (74.1), when the index dropped by 5.2 points with respect to May.
Appendix
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