In the euro area, focus this week will be on events related to the debt crisis (see Viewpoint), including possible actions by central banks….
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Among the oncoming data releases, of some interest are the June confidence surveys (euro area flash PMI, ZEW and IFO indices in Germany, INSEE in France, BNB index, consumer confidence in the euro area and Italy), which are generally expected to drop further and to prove compatible with persistently negative GDP growth in the euro area in both Q2 and Q3 2012.
In the United States, the focus will be more on events than on economic data. The FOMC meeting should open the door to new monetary stimulus, justified by an expected downward revision of growth projections for 2012-13, and by mounting downside risks. Data are not likely to change the economic picture. In May, housing starts, building permits, and existing home sales, should all be down compared to April. In June, the preliminary PMI and the Philly Fed index should point to a stabilisation of activity in the manufacturing sector.
Monday 18 June
United States
NAHB builder confidence is expected to drop in June to 28, after surging in May (to 29, +5 points). While the trend is still stronger than in the autumn, it has slowed compared to recent months.
Tuesday 19 June
Euro area
France. The synthetic business confidence index for the month of June is expected to deteriorate further, to 92 from 93 the previous month. The confidence of enterprises should stay compressed, well below the long term average of 100, due to renewed uncertainty and tensions tied to worsening financial tensions. The indications provided by the trends of orders and inventories, and by the output outlook in last month’s report both point to lingering weakness in the industrial sector over the Summer months.
Germany. The ZEW index on the expectations of analysts and institutional investors for the German economy is expected to drop further in June, due to renewed tensions on the financial markets, mostly deriving from Spain. However, the decline should be smaller than the previous month’s, placing the forward-looking component at 4.5, from 10.8. Following last month’s surprise recovery, we believe the assessment of current conditions should also worsen somewhat, while staying comfortably in positive territory, at 40 vs. 44.1 in May.
United States
Housing starts are expected to have dropped in May to 695k from 717k in April. Employment contracted in the construction sector in May, pointing to a slowdown in activity last month; in part, data releases are still reflecting a gradual adjustment, following the volatility generated by a particularly mild winter. Building permits are expected to drop to 700k from 723k in April, confirming a gradual, but very slow uptrend.
Wednesday 20 June
United States
The FOMC meeting should pave the way for new monetary stimulus. Macroeconomic projections are expected to be revised downwards; the press release should highlight the existence of increasing downside risks, as the recovery seems to be losing momentum in the second half of the year. Mr Bernanke’s press conference should indicate the Fed’s readiness to react with further interventions in the event of downside risks materialising as a result of the European crisis and/or of fiscal policy developments in the US.
Thursday 21 June
Euro area
The euro area composite PMI is expected to drop again (for the fifth month in a row) in June, to 45.5 (from a definitive reading of 46 in May). This would represent a new low since 2009. The decline should involve both the manufacturing (expected reading of 44.5, from 45.1 previously, in the wake of a slowdown in global trade indices) and the services sector, where confidence is expected to drop to 46.3 from 46.7 in May. These levels are consistent with a sharper contraction in GDP growth than the -0.3% q/q rate recorded in the winter months.
The preliminary estimate of consumer confidence in the euro area in June could be down marginally, to -19.5 from -19.3 previously. The slight decline should be entirely due to relatively resilient confidence in Germany (and, to a lesser extent, in France), as opposed to deteriorating households’ confidence in peripheral countries, again due to worsening labour market conditions, renewed tensions on the financial markets, and the effects of austerity measures.
United States
The preliminary estimate of Markit’s manufacturing sector PMI should be down in June to 52.5 from 53.9, indicating a further loss of steam in the manufacturing sector’s recovery.
The Philadelphia Fed index is estimated to improve to -1 in June from -5.8 in May. The May survey was equally negative across the board, with all components correcting, both in terms of current assessment and 6m views. The Beige Book’s indications for the Philadelphia district were considerably less favourable than the previous month’s, and point to stagnant or only slightly stronger activity, a modest decline in orders, and stable deliveries; expectations are also less upbeat compared to the April Beige Book. Price indices are expected to drop further.
In May, existing home sales are expected to be down to 4.55 million ann. from 4.62 million in April. Pending home sales contracted sharply in April, pointing to a temporary slowdown of the modest sales uptrend in the sector.
Friday 22 June
Euro area
Germany. IFO business confidence in June is expected to come in lower for the second month in a row, to 106.2, after retracing sharply to 106.9 in May. The decline should involve both the current situation (to 112.6 from 113.3) and the forward-looking component (to 99.9 from 100.9). Current tensions in the euro area could continue to weigh in the coming quarters on German productive activity, hitherto virtually immune from the widespread economic slowdown in the euro the area. IFO indications are compatible with a growth of close to zero for the German economy already this quarter.
Italy. Consumer confidence could drop again in June, to 86 from a previous level of 86.5, hitting a new all-time low for the series. Sentiment should be most affected by employment concerns, whereas inflation fears may ease somewhat. The labour market slack and the impact of a tighter fiscal policy leave no room for a recovery in the sentiment of households.
Belgium. The BNB confidence index should keep declining in June, in line with the past three months, levelling off at -12 from -11.2. Weakness could continue in the manufacturing sector, as opposed a slight improvement in the construction and retail sales sectors.
Appendix
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