In the euro area, while focus will continue to be on the developments of the debt crisis, the calendar of monthly economic data releases will be busy next week,……
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Euro area
– The preliminary estimate of consumer confidence in the euro area in July could be little changed (-19.7 from -19.8 in June). The display of resilience seems to be entirely Germany’s merit, while the widespread deterioration in labour market conditions and renewed tensions on the financial markets, combined with the effects of austerity budget measures, continue to weigh heavily on consumer sentiment in peripheral countries (the only “relief” for households could come from an easing of inflation risks).
Euro area
– France. The synthetic business confidence index is expected to stabilise at 92 in July (well below the long-term average of 100). Tension on the markets and widespread uncertainty tied to the sovereign debt crisis are still impacting business activity. Still no turning point in sight for industry, based on indications from the trends of inventories, orders and future output provided by the June survey.
– The euro area composite PMI is expected to recover slightly for the second month in a row in July, to 46.6 from 46.4 in June. The two-tenths rebound could involve both the manufacturing index (to 45.3) and services (to 47.3). However, these levels are still consistent with a contraction in GDP growth also in the Summer quarter (following the likely drop in the Spring months).
– The preliminary estimate of the July Markit PMI should be down to 52 from 52.9 in June.
Wednesday 25 July
Euro area
– Germany. The IFO business confidence index is expected to drop for the third consecutive month in July, to an estimated 104.3 from 105.3 in June. This month, assessment of the present situation should show a sharper decline (to 111.9 from 113.9) than the expectations component (96.9 from 97.3). The IFO index remains on levels higher than the long-term average (just above 100), and therefore more favourable compared to the corresponding surveys in the other euro area countries; however, in Germany as well, the trend of industrial activity is slowing.
– Italy. Consumer confidence could drop again in July, to 85 from 85.3 in June, hitting a new historical low for the series. Once again, confidence should be weighed down by unemployment fears (already at a high since 1994 in the June survey), as opposed to a possible further easing of inflation concerns. The deterioration of the labour market, and the restrictive fiscal policy, leave no room for a recovery in the sentiment of households.
– Belgium. The BNB confidence index is expected to drop for the fifth month in a row in July, to -14 in our estimation, from -13.2 in June. The manufacturing sector should stay weak, as opposed to a marginal potential improvement in construction and retail sales.
– Sales of existing homes in June are expected to increase to 375k from 369k in May. The indications provided by the builder confidence index are positive again in June, with the NAHB index on the rise to 30 from 29. The residential construction sector should continue to contribute positively to overall growth in 2012 and 2013, albeit still modestly.
Euro area
The year-on-year trend of the M3 aggregate is expected to be stable in June, at 2.9% (with the moving average also stable at 2.8%). The May recovery was mostly driven by the inversion of temporary operations carried out in April between credit institutions and non-monetary financial intermediaries, with an impact principally on overnight deposits. As regards the counterparts of the M3 aggregate, we expect lending to the private sector to keep showing a negative growth rate, hit (as also acknowledged by the ECB in its latest monthly bulletin) not only by slowing demand, but also by supply constraints.
– Italy. Contract-based wages are expected to rebound by one tenth in June, to 1.5% y/y. The figure is compatible with a two-tenth growth of wages on a monthly basis, mostly on the back of the planned increases provided for by the banking sector national collective labour contract. In any case, barring renewals, the trend of wages should stay broadly unchanged (and well below inflation) for the rest of the year as well.
United States
– Orders of durable goods in June are expected to increase by 0.2% m/m; net of the transport component, orders should be down by 0.5% m/m. Orders indicators are weak in all manufacturing sector surveys, and the trend of actual orders is broadly flat.
Euro area
– Italy. The index of business confidence among manufacturing companies should be down again in July, after unexpectedly rebounding last month (our estimate: 87.5 from 88.9 in June). The index is by now one standard deviation and a half below the long-term average, although it is still well above low hit early in 2009 (70.6). The June survey had shown easing pessimism on orders and production plans, despite a worsening of expectations referred to the overall economic situation. Uncertainty and credit restrictions caused by the protracted debt crisis will continue to affect business confidence for an extended period.
– Germany. Consumer prices are expected to rebound by four tenths in July, after declining in the previous two months. The rise would be in line with the month’s seasonality, as data on fuel indicate that the energy component’s contribution was close to zero. Inflation is seen stable, both at the national level (1.7% y/y) and in harmonised terms (2% y/y).
– The University of Michigan consumer confidence index for July (final) should be up just marginally to 72.5 from 72 of the preliminary survey. The persistent labor market weakness and growing uncertainty over 2013 fiscal policy leave no room for significant increases in household confidence in coming months.
– In 2Q 2012, GDP growth should slow to 1.7% q/q ann. from 1.9% q/q ann. in 1Q. The consumption trend should be the main culprit behind the slowdown in growth, up by only 1.7% q/q ann. from +2.5% q/q ann.; retail sales were almost stagnant, although we expect the services component to confirm the acceleration observed in April and May. Inventories should make a modest positive contribution, offsetting the drag represented by the foreign channel in 2Q.
Appendix
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