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3 Numbers: German Resilience Shows, Eurozone CPI, U.S. Confidence

Published 03/31/2015, 01:55 AM
Updated 07/09/2023, 06:31 AM

This year’s first quarter ends with a wide variety of economic releases, starting with the monthly report on retail sales in Germany for February. We’ll also see this month’s flash estimate of consumer price inflation for the Eurozone, followed by the Conference Board’s monthly update of US consumer confidence in March.

Germany: Retail Sales (06:00 GMT) Europe’s growth engine is living up to its nickname lately. As Bloomberg observed yesterday, “German companies and consumers are shrugging off most of what the world throws at them.”

Several sentiment indices tell the tale of a persistently rebounding mood in both the business and consumer sectors. Last week’s update of the Gfk Consumer Climate data found that “German consumers are becoming ever more optimistic”. We also learned last week from the Ifo Business Climate Index that mood among business executives ticked up to its highest level this month since last summer.

The hard data on the macro trend arrives with a lag, although the figures we’ve seen so far offer support for the upbeat narrative in survey releases. The last update on industrial production, for instance, was solidly positive and beat expectations with a slightly faster-than-projected gain for January. Meanwhile, retail spending was quite strong in this year's first month, and today’s report for February offers another chance to test the case of macro resilience in Germany.

The crowd’s expecting a bit of a setback, however. Econoday.com’s consensus forecast sees a 0.7% decline for last month’s retail spending against the previous month’s 2.9% surge. The weaker reading isn’t surprising, given the softer figures in Markit’s survey data for the retail sector in February. For a clearer view on the trend, keep an eye on the year-on-year comparison. The annual pace turned sharply higher in the last update, posting a 5.3% advance through January. A modest pullback from that robust rise is widely anticipated in today’s release, but that’s not going to derail Germany’s recent revival.

Eurozone: Consumer Price Index (09:00 GMT) The prospects for mild growth remain a reasonable forecast for Europe, a prediction that’s supported by the easing of deflationary pressures. Although headline consumer prices continued to fall on a year-on-year basis in February, the rate of descent wasn’t as deep as January’s slide. Keep in mind too that core inflation for the Eurozone has remained positive, albeit at a low rate. But here too there’s a hint of a firmer pricing in the slightly higher February figures against the previous month.


Today’s flash estimate for March is expected to bring more encouragement on the margins. Deflation’s bite is projected to ease again, with year-over-year headline consumer prices dipping 0.1% against 0.3% previously, according to Econoday.com’s consensus forecast. It’s a modest change, but it comes at a time when favourable momentum is bubbling in other corners. That includes this month’s launch of the European Central Bank’s quantitative easing program, which is designed to inject a much stronger dose of monetary stimulus into the economy.

Meanwhile, the business sector across Europe is finally showing a degree of the optimism that’s been buoying Eurozone consumer sentiment in recent months, as measured by the European Commission’s survey numbers. Yesterday’s March report for the Business Climate Indicator for the euro area jumped to its highest reading since last November.

The broad trend for the Eurozone is still shaky, but if deflation’s grip loosens again in today’s release the news will mark more progress in pulling back from the brink. There’s still a long way to go to repair the damage of the last several years, but the crowd expects that today’s CPI report will reinforce the case that the trend is still on the mend.

Euro Area Harmonised Consumer Prices

US: Consumer Confidence (14:00 GMT) The US economy continues to expand at a moderate pace, but yesterday’s update on personal spending and income suggests that the macro trend has stumbled recently. Although consumer purchases rebounded in February and posted the first monthly gain since last November, the year-on-year rise continued to decelerate, slipping to a 3.3% increase - the smallest in a year.

Harsh winter weather is still blamed for the soft patch of late, but that theory will be stress tested in today’s monthly release of the Conference Board’s consumer confidence index for March. In the previous update, this benchmark slumped, albeit after January’s strong rise. But the fact that real retail sales tumbled in February is a sign that a softer degree of optimism was accompanied by weaker spending on Main Street.

Today’s release for March is on track for another mild decline. Econoday.com’s consensus forecast sees the sentiment index dipping to 95.5 against last month’s 96.4. That’s still a strong reading, but another decline will remind the crowd that economic momentum has slowed. It could be a temporary phase. Indeed, the Conference Board’s leading indicator for this month gained 0.4% over February. That’s a sign that moderate growth is still the path of least resistance. A bigger test will arrive in this Friday’s update on US payrolls. As for the mood among consumers, it’s still upbeat, but for the moment it’s becoming clear that downsizing expectations remains topical.

US: Consumer Confidence Index vs Real Retail Sales

Disclosure: Originally published at Saxo Bank TradingFloor.com

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