In the Euro area GDP growth should be confirmed at 0.3% qoq in 4Q10, in line with the preliminary growth estimate. Retail sales in the Euro area should be stagnant in February, on the back of an unexpected fall in Germany and ..…
stronger-than-expected growth in France. In Germany, orders and industrial production might expand further in February, confirming the outstanding performance of the German economy.
The coming week is thin on data in the United States. The ISM non-manufacturing index should be up slightly in March, confirming high activity levels. The minutes of the March FOMC meeting should show the resumption of the exit strategy debate, though without fundamentally altering the FOMC’s cautious March message.
Tuesday 5 April
Euro area
Retail sales in the Euro area might be flat month-on-month in February after growing by +0.3% mom in January. Among the major Euro area countries, consumer spending outstripped the consensus in France (+0.9 mom), whereas sales were down in Germany (-0.4% mom) and Spain (-0.6% mom). Quarter-on-quarter, sales are on track for +0.2% qoq in March after -0.2% qoq at year-end. Year-on-year, sales would have accelerated from 0.7% yoy to 1.0% yoy. In general, an upturn in household consumption does not look imminent: the recent, modest improvements in the labour market are more than offset by the erosion of purchasing power due to the rise in inflationary pressures and by the historically low labour income levels. Looking forward, private consumer spending is unlikely to go much beyond 1% in 2011.
United States
The non-manufacturing ISM in March should continue the uptrend stretching back to year-end 2008. The composite index should rise from 59.7 in February to 60.1 in March, with further improvements in employment and deliveries, stabilisation of orders and activity, and a slight fall in prices.
March minutes, which will show positions on all the possible exit strategy options. In the last few days the extreme wings of the FOMC have revived the debate, while the centre has remained silent. The divergences over the exit strategy are thus centre-stage once more, and they accord even greater weight to the middle-ground of the FOMC and to the members of the Board, who are cautiously inclined towards an expansionary bias. Our central forecast remains the completion of the purchase programme totalling USD 600Bn by the end of summer, but we should stress too that in third quarter, after the fiscal crisis risks in the USA have been resolved, preparations will get under way for the exit strategy.
Wednesday 6 April
Euro area
The final reading of the national accounting data for the Euro area in 4Q10 should confirm GDP growth of 0.3% qoq, as in 3Q10. Year-on-year growth would be confirmed at 2.0% vs. 1.9% the previous quarter. The breakdown should confirm the acceleration in private consumption to 0.4% from 0.1% qoq before and the contraction in investments to -0.6% from -0.1% qoq. As per the previous estimate and as in 3Q10, the contribution of the foreign channel to growth would be 0.4%. Public spending should be confirmed as slowing to 0.1% from 0.4% qoq. Lastly, as per the preliminary estimate, inventories should have shaved two-tenths off growth. For first quarter 2011 we forecast a marked rebound in Euro area growth to 0.7% qoq (2.3% yoy), which should continue through 2Q11, giving a full-year GDP growth figure of 1.9%.
Germany. Factory orders should be up by 0.4% mom in February, after jumping to 2.9% mom in January. The orders component of the IFO index improved sharply in March and the orders indications in the PMI survey and the EU Commission confidence index, though slipping, stand just shy of the all-time highs.
Thursday 7 April
Euro area
Germany. Industrial production might correct by 0.5% mom in February after bouncing by 1.8% mom in January. The year-on-year dynamic is expected to ease to 12.2% yoy from 12.4% yoy, leaving the quarter-on-quarter dynamic on course for growth of 1.0% qoq after +2.1% qoq in 4Q10. The latest forecasts for the German economy from research institute DIW, published 30 March, signal an acceleration in GDP in first quarter 2011 (+0.9% qoq) and confirm the solid recovery in the German economy.
Appendix
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