Europe’s nascent economic recovery is in focus today with an update on retail sales for Italy and the initial April estimate of consumer confidence for the Eurozone via the European Commission’s monthly release. A fresh look at the US economy is also on the agenda for Wednesday with the publication of new figures for existing home sales.
Italy: Retail Sales (09:00 GMT) The Eurozone economy appears to be in recovery mode again, but the improvement is mixed, depending on where you look. Italy’s big-picture trend, for instance, still looks weak. Is that about to change? The crowd will focus on today’s clue: retail sales data for February.
There’s a case for expecting good news courtesy of the sharp gains in consumer confidence lately. The government’s index of the mood in March jumped to its highest level in more than a decade, according to Istat, Italy’s national statistics bureau. The increase marks the third monthly rise for the consumer confidence index, reflecting a break with the previous run of declines through the second half of 2014. Is this a sign that spending has turned a corner?
Yes, or so the previous update on retail spending suggests. The mild 0.1% monthly rise in January was in line with expectations, although the unadjusted 1.7% year-over-year pop surprised analysts. Then again, if this turns out to be a false dawn it wouldn’t be the first time that a budding sign of growth for Europe’s third-largest economy wilted soon after a run of encouraging signals.
But it’s reasonable to be optimistic ... again, in part because of the upbeat mood of late in Italy’s consumer sector. The fact that there are recovery signs for the Eurozone generally doesn’t hurt either.
The bottom line: if today’s spending data reflects another increase -- particularly in the year-over-year comparison -- Italy's prospects for a period of growth, however mild, will look a bit brighter.
EU: Consumer Confidence Index (14:00 GMT) The mood among consumers for the Eurozone generally continues to improve, according to data from the European Commission (EC). Today’s flash estimate for April is expected to keep the rebound in play.
Econoday.com’s consensus forecast projects that the EC’s Consumer Confidence Indicator (CCI) will tick higher for this month's initial estimate: -2.5 compared with. March’s -3.7. Even if CCI remains flat, it’s still the highest level since the summer of 2007, which is to say before the global economy tanked and the financial crisis of late-2008 unleashed chaos.
The narrative du jour is that the tide seems to have turned. Even the long-suffering mood in Europe’s business sector is hinting at revival, based on the EC’s Business Climate Indicator.
There’s still a long way to go, of course, but another increase in today’s April CCI estimate will signal that the recovery continues to gain traction. “The economic situation and the short-term outlook for the euro area are currently brighter than they have been for several years,” ECB President Mario Draghi said last week. Today’s CCI data isn’t likely to provide an excuse to question his optimistic spin on the numbers.
US: Existing Home Sales (14:00 GMT) Today’s monthly update of sales activity in the US housing market is expected to deliver some much-needed cheer for the US economic outlook. In the wake of recent signs that first-quarter growth has slowed to a crawl, existing home sales are on track to provide an upbeat signal.
Briefing.com’s consensus estimate projects that sales of existing homes — the largest slice of the market — will climb to 5.05m units for March. If so, activity will reach its highest levels in four months and perhaps mark a turning point for what has been a mixed trend for housing generally.
Another clue for thinking that the arrival of warm weather will lift demand comes via last week’s upbeat report on the mood in the home building industry in April. “As the spring buying season gets underway, home builders are confident that current low interest rates and continued job growth will draw consumers to the market,” said the chairman of the National Association of Home Builders (NAHB), which will publish today’s sales figures. The group previously reported that its Housing Market Index increased in this month’s estimate, touching the highest level so far this year. “This uptick shows builders are feeling optimistic that the housing market will continue to strengthen throughout 2015.”
A gain in today’s existing home sales data for March won’t, by itself, confirm the NAHB’s optimistic forecast. But if forecasters are correct, and transactions tick higher, the case for arguing that the housing market is strengthening will look a bit stronger. In turn, the news will take some of the edge off the worst fears for the US economy.
Disclosure: Originally published at Saxo Bank TradingFloor.com