Taking stock of data surprises. Positive surprises in the euro area: recovery taking hold driven by oil and the exchange rate. Mixed data in the United States, but beneath the Winter snow, growth should prove to be still solid……….<\/p>\n
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Intesa Sanpaolo – Research Department – For professional investors and advisers only<\/strong><\/p>\n Surprises from data releases have had mostly opposite signs on the two sides of the Atlantic. In the euro area, sentiment surveys got off to a scorching start in March, with the ZEW indexbeating expectations both in Germany (55.1 from 45.5, vs. a consensus estimate of 52.0) and in the euro area (62.4 from 52.7). The markets are still celebrating the ECB’s QE, with a favourable fallout on the confidence of ZEW survey analysts. However, the uptrend of stock and bond markets is not alone in supporting sentiment. The euro area composite PMI improved more than expected, from 53.3 to 54.1, as opposed to forecasts for a more cautious 53.6, thanks to a 0.9 rise of the manufacturing index, to 51.9, with the services index up by 0.6 to 54.3. For the time being, the recovery in the euro area is largely driven by Germany.<\/p>\n The German manufacturing PMI rose to 52.4 from 51.1.<\/strong> The IFO index improved by around one point, to 107.8. Both indices rose more than expected. The Bank of Belgium’s index rebounded by two points to -6, on a sharp increase in export orders, clearly signalling that industry in neighbouring Germany has picked up again. In contrast to the brilliant German comeback, explained by combination of very lively domestic demand and recovering exports boosted by the exchange rate, weakness in France was confirmed, with the INSEE index again below 100 and the manufacturing PMI still at 48.2, albeit on the rise compared to last month.<\/p>\n On the whole, positively surprising data confirm that Germany could continue growing at the same pace as at the end of 2014: +0.7% q\/q. As regards the euro area average, GDP growth at the beginning of 2015 should be in line with the +0.3% recorded in 4Q 2014, thanks to Germany’s contribution, as the improvements in France and Italy are more uncertain. In any case, we believe the pace of quarterly growth could accelerate to 0.4-0.5% q\/q in the spring, when the effects of the depreciation of the exchange rate become more evident. Based on our estimates, the impact of the weaker euro will peak between the end of the summer and the spring of 2016. It will take a little longer to see the effects of the EAPP on the real economy, although the impact on rates and stock prices is tangible.<\/p>\n In the US, 2015 has opened with a string of negative data surprises, following a consistently positive autumn in 2014. Starting in 2011, the first quarter of each year has always been disappointing, and followed by a strengthening in the rest of the year. This suggests seasonal adjustment difficulties inherited from the great recession, in addition to the obvious negative effects of severe weather conditions in the opening months of 2014 and 2015. This year, negative surprises came in unbroken succession up to mid-March, from almost every front, with the exception of the labour market, which by contrast surprised strongly on the upside (payrolls and the unemployment rate in February, jobless claims in February-March). In the past few weeks, data have proven more mixed, with disappointing manufacturing output and February durable goods, as opposed to mostly encouraging indications for the residential housing sector (housing starts, home sales case). Also, the core CPI increased by 0.2% m\/m for the second month in a row in February, signalling very limited risks of further disinflation.<\/p>\n Next week, we expect the most important data releases for March to provide positive signals, supporting the view of a sustainable recovery, despite the temporary drag tied to adverse weather conditions and the more lasting impact of the exchange rate.<\/strong> We expect another strong Employment Report in March, with non-farm payrolls on the rise by around 270k, with all sectors showing solid hiring and a possible increase in the participation rate. The expansion of the labour force could result in modest increase in the unemployment rate to 5.6%, a positive signal if tied to a higher participation rate. We also expect an acceleration of both hourly earnings and hours worked. The manufacturing ISM should recover, after three consecutive corrections. Auto sales are estimated to pick up sharply after two weak months due to adverse weather. Doubts over the sustainability of economic growth in the US should be largely cleared, in our view.<\/p>\n <\/p>\n Quelle: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":" Taking stock of data surprises. Positive surprises in the euro area: recovery taking hold driven by oil and the exchange rate. 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