In the Euro area, the key data due out next week arrive on Tuesday 31 May: inflation might be steady at 2.8% yoy in May; unemployment is expected to be unchanged in Italy and across the entire Euro area.…
The coming week is packed with data in the United States. The manufacturing surveys should show signs of weakness in activity, with the ISM and Chicago PMI both down. The non manufacturing ISM should instead move up. Auto sales are expected to be down sharply in May,
partly due to supply-side issues connected with the Japanese earthquake. Household confidence
should rise. The employment report should show a slowdown in employment, but only a modest
fall in the unemployment rate. Construction spending is expected to be up slightly in April.
United States
Euro area
– France. Consumer spending might bounce by a half of one percentage point in April (after the fall of -0.7% mom in March). Year-on-year, sales would accelerate to 4.5% yoy (from 2.6% yoy before). France is the only major euro area country showing satisfactory consumer demand.
– Germany. The German unemployment rate is expected to fall to 7% in May, on a 25k reduction in the jobless total. This would mark an all-time low for the unemployment rate since series inception in 1991. The resilience of the labour market is reassuring despite the gradual phasing-out of the temporary Kurzarbeit scheme.
– Italy. The unemployment rate, according to the preliminary estimates, might remain steady at 8.3% mom in April, a high value relative to the average for recent years but short of the highs recorded around 12 months ago (8.6%). Temporary redundancy applications were also down in April (20%, back below 100M hours (92.1 vs. 102.5 in March), signalling that the labour market is stabilising.
– Unemployment in the Euro area might be steady at 9.9%. The figure should confirm a persistent and broad gap between the peripheral and core countries (notably Germany). In any case, it is fair to say that the worst is over for the labour market in the Euro area as a whole and the coming months should show ongoing gradual improvements.
– The preliminary estimate for May should show Euro area inflation steady at 2.8% yoy. The fall in energy prices seen in recent weeks has reduced the upside inflation risks. Ex the more volatile components, the CPI should still be under control (and might actually be down on the 1.6% yoy in April).
– Italy. The consumer price dynamic is expected to be up 0.1% mom in May, slowing from past months (0.5% mom in April) mainly on account of the fall in fuel prices. Year-on-year inflation would remain steady at 2.6% yoy. The harmonised measure should also show a rise of just one-tenth and year-on-year inflation steady at 2.9% yoy.
– The Chicago PMI is expected to fall to 62 in May from 67.6 in April. The index should continue to correct from the high of 71.2 recorded in February (highest since 1988).
Production should be sharply down from 70 in April, partly due to the temporary closure of Japanese car factories. Orders and employment should also correct from April’s still high levels. The sector surveys show signs of weakness, partly owing to the effects of the Japanese earthquake, partly due to a slowdown from the very high pace of activity seen in 1Q11.
– Household confidence as measured by the Conference Board should rise to 67 in May from 65.4 in April. The Consumer Comfort weekly index of confidence rose in the last week. The survey should show an improvement in both the present situation (39.6 in April) and expectations (82.6 in April, well below the February high of 97.5). The labour market indicates improved in April: May might bring a fresh deterioration, likely short-lived and due to the dip in auto sector activity.
United States
– The ISM manufacturing index should fall to 58 in May from 60.4 in April. The regional surveys were mixed or weak, with the Philly Fed and Richmond Fed down heavily. The ISM should show a reduction in inventories, after the strong gain recorded in April. Prices should also soften from the April high of 85.5. Orders too are likely to correct (mainly on the fall in export orders), as is production.
– Construction spending should be up 0.4% mom in April, after +1.4% mom in March. The growth in March was partly driven by more benign weather conditions than in the previous months. April should show modest gains in residential building, vs. stagnation in housing.
– Auto sales are expected to fall to 12.5M units ann., sharply down on the first few months of the year, when levels topped 13M units. The decline in sales likely reflects, to some degree, the supply-side problems stemming from the Japanese earthquake.
United States
The unit labour cost should be up 1% qoq.
United States
– The non manufacturing ISM is expected to move up to 54 in May from 52.8 in April. April saw a large drop, from 57.3 in March, with ample corrections for activity, orders, employment. The trend had been down from February’s peak at 59.7, though there is room now for an upside correction towards levels close to end-2010.
Appendix
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