In the euro area, industrial production should be broadly unchanged in November, after declining by 1.4% m/m the previous month. In Italy, output is expected to have dropped by 0.5% m/m, less than in the two previous months. The first annual estimate of 2012 GDP in Germany will shed some light on the 4Q trend………
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The second estimate should confirm euro area inflation at 2.2% y/y in December, with the trend of core inflation, i.e. net of energy and food prices, stable at 1.6% y/y. The first indications on business confidence in January 2013 will be provided by the Bank of Belgium survey, which should outline a recovery.
The host of economic data due for release in the United States should indicate a recovery in manufacturing and confirm the positive trend of residential construction, with inflation pressures at bay. The partial solution of the fiscal cliff issues will represent an element of discontinuity in data series, with a probably positive fallout on business confidence and activity in the opening months of 2013. The January Empire and Philly Fed indices, and December industrial output, should all be in positive territory. December housing starts and permits, and January homebuilders’ confidence, should all be on the recent upward trends. The December CPI and PPI indices will reflect lower gasoline prices and the generally moderate trend of core prices.
Monday 14 January
Euro area
Euro area. Industrial output is expected to have stayed stable in November, after decreasing by 1.4% m/m the previous month. The reading would leave output on course for a 2.6% q/q drop, from +0.6% q/q, and signals a contraction in euro area GDP of 0.4% q/q. December confidence surveys suggested a slight improvement in activity and demand conditions, which nonetheless are still at levels compatible with an extension of the recession into early 2013.
Italy. Industrial output will continue do drop in November (-0.5% m/m) albeit at a slower pace than in the previous two months. Output adjusted for workdays should contract by 5.2% y/y, from -6.2% y/y. If confirmed, the November reading would leave output on course for a drop of around 2.0% q/q in 4Q 2012, from -0.6% q/q in the summer quarter, compatible with a sharper GDP contraction at the end of the year (-0.6% q/q). The outlook for Italian industry is still challenging, with persistently tight financial conditions; however, foreign demand conditions recovered in December after declining for around five months in a row.
Tuesday 15 January
Euro area
Germany. The final estimate should confirm December inflation at 2.1% y/y, for both the harmonised and national measures, on the rise from 1.9% the previous month.
Germany. The annual estimate of 2012 GDP should outline an 0.8% growth of the German economy, in line with a 0.35% contraction in GDP at the end of 2012. We expect the deficit to have closed at -0.2% of GDP.
In Italy, inflation should be confirmed stable at 2.6% y/y in harmonised terms, and on the decline to 2.4% y/y from 2.5% y/y at the national level.
United States
The NY Fed’s Empire index is expected to rise to +3 in January from -8.1 in December. Over the autumn the Empire dropped to levels well below those implied by the long-term relationship with the ISM. The difference between the two surveys may be amplified by Hurricane Sandy, the effects of which were concentrated in the NY area. Our forecast is for a recovery in the pace of growth of manufacturing activity, after a stagnant 4Q 2012.
Retail sales are expected to have improved by 0.4% m/m in December, after +0.3% m/m in November. Sales ex-autos should be up by 0.3% m/m, after stagnating in November. Despite stable auto sales in December, retail sales should show an increase, and recover part of the November rise, incorporating a modest price effect. The drop in gasoline prices will weigh on aggregate sales (price effect), down for the second consecutive month. In November, the aggregate net of the gasoline and auto components had risen sharply (+0.7% m/m), and a normalisation should follow in December. The sales trend remains moderately positive, in any case.
The December PPI is expected to be down by -0.2% m/m, from -0.8% m/m in November. The core index should show a 0.1% m/m rise, in line with November. The expected drop of the headline index will reflect corrections in both energy and food prices. As regards food, the expected decline will not balance the sharp increase recorded in November (+1.3% m/m); energy prices should be down by -0.8% m/m.
Wednesday 16 January
Euro area
Inflation in the euro area should be confirmed at 2.2% y/y in December. Consumer prices are estimated to have risen by 0.3% m/m in the month. Net of energy and fresh food prices, consumer price growth is expected at 0.5% m/m, leaving the year-on-year rate unchanged at 1.6% y/y. Inflation should drop back below the 2% mark in the opening months of this year. Risks to the medium-term trend are skewed to the downside, given the persisting slack in the economy.
United States
The December CPI is forecast stable, after a -0.3% m/m drop in November. The core CPI should be 0.2% m/m higher, beating the average increase for 2H 2012 (+0.1% m/m). The headline index will reflect the third consecutive monthly drop in petrol prices. The core index should reaccelerate moderately, in the wake of price increases in clothing & apparel and hotels rate, after weak readings in November. Rents will continue to grow at the sustained rates seen in the past year, while services (medical services especially) should rise only moderately. Year-on-year, the CPI is estimated to rise by 1.8% y/y, as opposed to a stable core
index at +1.9% y/y.
Industrial output is expected to be up by 0.2% m/m in December, from +1.1% m/m in November. This relatively weak trend is due to the forecast correction in utilities. The manufacturing sector is expected to score a solid rebound, +0.4% m/m. The December Employment Report highlighted a surge in employment numbers and working hours, although the brilliant performance was also due to the favourable comparison with the previous month, negatively impacted by Hurricane Sandy.
Homebuilders’ confidence (NAHB) in January should stabilise at 47, in line with December, after eight consecutive increases to levels last seen in April 2006. New home sales are lagging galloping builders’ confidence: the gap between the two series should close as a result of an acceleration in sales and a slightly slower trend for builders’ confidence. The trend in construction and sales remains unmistakeably positive for 2013.
The Fed will release its Beige Book in preparation of the end-of-January FOMC meeting. The report should outline a few signals of a recovery in manufacturing activity, and provide indications generally in line with the forecasts included in the Fed’s outlook, for a moderate growth of the economy. The Beige Book could point to a modest improvement in labour market conditions in some sectors, with inflation pressures at bay.
Thursday 17 January
United States
Housing starts in December are estimated to increase to 885k from 861k in November. Data on employment in the construction sector point to a rebound in housing starts after the November decline. Permits should correct after surging in November, dropping to 890k from 900k in November, reinstating the moderate uptrend recorded since 4Q 2011.
The Philadelphia Fed index should be down in January to 6 from 8.1 in December. The December survey had marked a sharp rise (+18.8 vs. -10.7 in November). Orders and deliveries rose significantly in December and may trace back a little in January, while continuing to signal a return to growth, after persisting weakness during most of 2H 2012. Indicators on a six-month horizon, while staying comfortably positive, should also level off at intermediate levels between November and December (composite index at 30.9 in December from 20.5 on average between October and November).
Friday 18 January
United States
Consumer confidence as surveyed by the University of Michigan is estimated to show a modest rise in January (prel.) to 74 from 72.9 in December. The index plunged in December on fears of an agreement over the fiscal cliff not being reached, therefore in January confidence should normalise at broadly the same levels as in October-November, with no indication, for now, of resuming an uptrend.
Appendix
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