European releases on Friday:
Q4 Forecast Actual
U.K. GDP (F) (QoQ) +0.6% +0.6%
U.K. GDP (F) (YoY) +2.9% +2.8% March
French Bloomberg Retail PMI 58.8 (prior) 53.3
Italian Bloomberg Retail PMI 43.8 (prior) 36.4
German Bloomberg Retail PMI 52.1 (prior) 51.5
Euro-zone Bloomberg Retail PMI 52.4 (prior) 48.2
Swiss KOF Leading Indicator +1.60 1.54
The European retail PMI numbers reflect the difference between industry and consumers. Industry may well be confident and production numbers are strong but consumers are wary. The alarming rise in both food and energy related products have produced the same reaction around the globe.
When personal finances come under threat the immediate reaction is to reign back on spending elsewhere. The same reaction is being seen on both Japan and the States and this will likely dampen growth over the months to come. Add to this the shortfall in liquidity in the credit markets (highlighted by the ECB’s Mersch) produces a rather delicate line to tread. The globalization bubble has also produced a number of high profile leveraged buy-out companies and the longer the situation persist the odds on one of these LBO’s collapsing increases. Another area of concern which will hit consumers at a time when it is just not needed is mortgages. The U.K.’s Financial Times reported on the tightening in supply of home loans with the consequent hike in mortgage rates implemented by three of the country’s biggest lenders. This came hot on the heels of the GfK/NOP U.K. consumer confidence index which crashed to its lowest level in 15 years at -19. That’s the 7th consecutive monthly fall. Only one year ago it was at -8. Extended periods of this type of strain would see the credit crisis spread more insidiously into the global economy and force a more sustained recession that could last well into next year.
States releases on Friday:
February Forecast Actual
U.S. Personal Income (MoM) +0.3% +0.5%
U.S. Personal Spending (MoM) +0.1% +0.1%
U.S. PCE Core (MoM) +0.1% +0.1%
U.S. PCE Core (YoY) +2.1% +2.0%
Modest good news from the States from the personal income and spending numbers. They are nowhere close to providing any “feel good” factor but they will at least provide a degree of comfort that PCE is not collapsing as fast as some had feared.
However, they are not enough to avoid the potential spiraling of the high inflation - reduced spending – higher cost of credit - lower consumer confidence pattern. Martin Feldstein may be revealing the true thoughts on the U.S. administrations’ minds as he commented on the Dollar’s decline coming at the right time. Rather strangely he noted that the Dollar’s decline against the Yen has been more than 20% since 2002. He seems to have avoided the fact that, from last year’s peak to this year’s trough it has fallen by 22%. However, he welcomed the decline since it provides greater U.S. competitiveness. It should spark calls for the U.S. administration to re-assert its strong Dollar policy. If not then the risk is for protectionism to come through attempting to manipulate exchange rate levels… So Friday presented us with a broadly stable Dollar-(mainland) Europe, a weak Pound on the back of the drop in house prices and a weak Dollar against the Yen in spite of the extremely poor Japanese numbers on Friday. The beginning of the week could produce more of the same. However, as we move forward the risks are for the European manufacturing PMI to come under a degree of pressure while Dollar-Yen will largely be impacted by the BOJ’s Tankan Report which risks being uncomfortably soft.
More later once the daily analysis has been done…
There following releases are due from Asia due today:
Australia
February
HIA New Home Sales (MoM)
Private Sector Credit (MoM) +1.1%
Private Sector Credit (YoY) 16.2% March
TD Securities Inflation (MoM)
TD Securities Inflation (YoY) Japan
February
Industrial Production (MoM) - 2.0%
Industrial Production (YoY) +2.9%
Labor Cash Earnings (YoY) +0.6%
Vehicle Production (YoY)
Housing Starts (YoY) - 1.0%
Annualized Housing Starts (YoY) 1.20mn
Construction Orders (YoY)
March
Nomura/JMMA Manufacturing PMI
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