In the euro area, focus will again be on the EU Summit, but the week will bring a host of data releases. In Spain, the preliminary GDP estimate will point to a 0.4% contraction at the end of 2011……….
The week’s calendar of events is a busy one in the United States. January data should confirm a moderate expansion of the economy. The Employment Report is expected to show a weaker increase in jobs compared to December, with the unemployment rate unchanged at 8.5%. manufacturing sector surveys (ISM, Chicago) should be compatible with an expansion of the sector, with no further acceleration. Household confidence should continue to recover, and auto sales are expected to be in line with December figures. Personal spending is forecast to be up only slightly in December, as opposed to a stronger increase in income.
Monday 30 January
Euro area
Spain. The preliminary Q4 GDP estimate will indicate that the country has fallen back into recession. In line with the estimates published by the Bank of Spain, we expect a 0.3% q/q drop, after the stall over the summer months. In annual terms, growth will slow to 0.2% y/y from 0.8% y/y previously. We expect fiscal consolidation (2.6% of GDP), the slowdown of the global picture, and the process of rebalancing the further correction of the real estate sector, will leave the GDP trend in 2012 in markedly negative territory (-1.7%).
The European Commission’s economic confidence survey should climb back to 94.1 in January, from a previous reading of 93.3, a level still consistent with a slight contraction in euro area GDP at the beginning of the year. The rebound could prove temporary, and we expect it to be mostly driven by the services sector (-1.5 from -2.1) and consumers (the preliminary estimate showed a 1.3 point recovery to -20.6). The picture within the euro area remains markedly mixed, with France, Germany and the Nordic countries incurring only a modest contraction of GDP, while in peripheral countries we expect a more severe recession, with Portugal the most affected (-3.7), followed by Spain (-1.4) and Italy (-1.0).
Italy. Business confidence is forecast as stable at 92.5 in January. This could be simply a hiatus on historically low levels. Italian industry keeps posting more disappointing performances compared to France and Germany, penalised by the debt crisis, weakening domestic demand, higher interest rates, and uncertain future prospects.
Germany. In December, retail sales should have recovered only partially (+0.3% m/m) from the drop recorded in November (-1.0% m/m). Consumer confidence in Germany plummeted at the end of 2011 (to levels around 10 points lower than the average in the first nine months of 2011). In the quarter, retail sales are estimated to have grown by 0.5% q/q, slowing from +0.8% q/q in September.
Germany. Data from the Laender should be compatible with a 0.5% m/m drop in consumer prices (0.6% m/m in terms of the harmonised rate), thanks to a favourable seasonal effect and to a zero contribution from the energy sector. Inflation is expected to slow by two-tenths in terms of the national rate, to 1,9% y/y, and by one-tenth at the harmonised level, to 2.2% y/y.
Personal spending is forecast to have made very little progress in December, +0.2% m/m, based on weak retail sales data. Personal income is estimated to be up by 0.4% m/m: the information contained in the employment report pointed to a sustained uptrend of work hours and wages. The core consumption deflator should show a 0.1% m/m increase (1.8% y/y). The savings rate is forecast to rise back to 3.7% from 3.5% in December.
Tuesday 31 January
Euro area
The unemployment rate is expected to have stayed at 10.3% in December. The cyclical slowdown will weigh on the labour market trend, and push the unemployment rate up to 11% in the autumn.
Germany. The unemployment rate is forecast to stay stable at 6.8% in January, and the number of unemployed people should be down by 10k. The labour market is expected to keep benefiting from a resilient economic cycle in the summer and autumn of 2011, and the year-end slowdown should translate into unemployment at the usual time lag (mid-2012).
France. December retail sales are expected to show a 0.6% m/m rebound (from a 0.1% m/m decline in November). However, the monthly rise will not be enough to change the year-onyear trend, which will remain in negative territory (-1.6% y/y). The trend of employment, and uncertainty tied to the debt crisis in the euro area, are conditioning consumer choices, with inevitable repercussions on consumption.
Italy. Unemployment could be up by one-tenth, to 8.7% in December. In the months ahead, the unemployment rate may rise to over 9% in our view, penalised by the economic cycle.
United States
The January Chicago PMI is expected to be up to 63.2 from 62.8 in December. The Chicago index has consistently stayed above the ISM since the beginning of 2010, also thanks to the recovery in the auto sector, which should continue in 2012 and support the Chicago area in particular. Production localisation in the United States by Japanese manufacturers is a factor of major importance, together with the ongoing pickup in car sales in the US.
The Conference Board consumer confidence index should rise in January to 69 from 64.5, scoring a third consecutive increase. The expectations component should improve from to 83 from 76,4, hitting a high since April 2011. Current conditions are expected to improve at a slower rate, to 48 from 46.7.
Wednesday 1 February
United States
ADP non-farm payrolls are estimated by consensus to be up by 185k in January, from 325k in December.
The January manufacturing sector ISM is expected to rise to 54 from 53.9 in December. Regional surveys in January were mixed, with the Empire on the rise, but the Philly Fed’s end- 2011 levels revised downwards. On the whole, however, the manufacturing sector continues to grow at a sound pace, and the ISM’s indications should remain positive, with orders still increasing and sustained production.
New car sales in January are estimated to have increased to 13.6 million ann. from 13.48 million in December. Sales to consumers may slow slightly in January, but the total should be supported by recovering sales to companies. The auto sector will continue to make a positive contribution to overall growth and consumption in 2012.
Construction spending is forecast to have increased in December by 0.3% m/m. Weather conditions were favourable, but construction sites dropped significantly and unexpectedly in the month.
Thursday 2 February
United States
Productivity growth in Q4 2011 is estimated to have slowed to 1% q/q from 2.3% the previous quarter. Unit labour cost should be back on the rise, by 1%, after declining by the same rate in Q3 2011.
Friday 3 February
Euro area.
Italy. In January, consumer prices are estimated to have risen by 0.3% m/m at the national level, resulting in an inflation rate of 3.2% y/y, from 3.3% y/y previously. The monthly trend is again expected to have been impacted by higher fuel prices. At the harmonised level, prices are forecast to be down by 1.6% m/m due to seasonal factors, which the national index does not take into account. The harmonised inflation rate is expected to be down to 3.6% y/y, from 3.7% y/y.
United States
Non-farm payrolls in January are expected to be up by 145k, after a 200k increase in December. New jobs in the private sector are estimated at 165k (from 212k). Labour market indicators are compatible with a continuation of a moderate employment uptrend. In January, private sector employment growth in retail and transport should be more modest. The unemployment rate should remain unchanged at 8.5%, as in December. Hourly wages are forecast in line with the trend, at +0.2% m/m. On the whole, data should confirm the Fed’s assessment that the labour market is still recovering at a very slow pace, supporting expectations for the introduction of new monetary stimulus in the not-too-distant future.
The January non-manufacturing ISM is estimated to rise to 53 from 52.6 in December. The December survey was positive, with no indications of an acceleration in activity. Services are still growing at a more modest pace than the manufacturing sector. This reflects not only exchange rate effects, but also stronger demand from households for goods rather than services.
Appendix
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