Euro Money Supply, US GDP & Cons. Sentiment

The last round of macro numbers before next week’s central bank bonanza! First quarter gross domestic product from the US and the monthly monetary aggregates from Europe are both important inputs for central bankers. Of some interest to CHF-watchers will be the Swiss National Bank’s Thomas Jordan, speaking at 08:00 GMT.

EU March Monetary developments in the euro area, M3 (08:00 GMT)
After confirmation earlier this week that the Eurozone’s economy is slowing (Markit PMI and IFO indices), the bank lending and money supply data for March is the last relevant data point before next week’s meeting of the European Central Bank’s governing council. Consensus forecast for the annualised M3 growth is 2.9 percent after February’s 3.1 percent. The forecast is somewhat outdated, as the surveys have been done before this week’s bad macro releases and especially the quarterly bank lending survey, published last Wednesday by the ECB. The survey confirmed weak loan demand for the first quarter of 2013 – mostly driven by “the substantial negative impact of fixed investment on the financing needs of firms”.







After today’s number, the ECB has all the excuses it would need to ease monetary policy further next week. A rate cut would do little to alleviate the situation, but it would be important symbolically – that the ECB “gets it”. What is really needed now are some sort of targeted policies to spur lending in the crisis countries. As the German chancellor Ms. Merkel stated yesterday, the monetary policy is a bit too easy for Germany, but too tight for the others. This is obvious, and perhaps it is a sign that the political leaders also “get it”. Doesn’t that statement sound like a vague admission that the euro is a failure and one size does not fit all when it comes to monetary policy?

US Q1 GDP, advance estimate (12:30 GMT)
Consensus is expecting a robust 3.2 percent growth in the first quarter, following the fourth quarter’s dismal 0.4 percent growth. The fourth quarter was plagued by one-offs like the fiscal cliff and the storm, and both consumers and businesses played defensive and cut spending and inventories. A lot of the growth in the first quarter will just return to normalcy in a sense. With the March durable goods report indicating slow investment needs and the European recession being in full swing, the main comfort will be the cheaper energy prices.



As the chart of contributing factors shows, the public sector’s cuts are the major negative currently. Even though the housing sector has been recovering nicely, until its effects translate into a stronger consumer sector, followed by business investments and supported by public spending, the economy will remain stuck in a relatively modest and slow recovery. This puts the Federal Reserve into a tight spot, as the asset purchase programs are commonly seen to be slowed down soon. Blogs in The Wall Street Journal and especially The Washington Post have nice previews of the GDP numbers. It is worth noting though that this is an advance report and it will be revised several times in the future. But this is the report that the Federal Reserve will have to work on in its Federal Open Market Committee meeting next week.

US April Thomson Reuters / Uni.Michigan Survey of Consumers, final (13:55 GMT)
After the flash estimate of the index at 78.6 from two weeks ago, the final number is expected to be 73.8, a moderate reading and in the lower end of the past couple of year’s range. While the housing sector has been positive, the fiscal tightening and uncertain growth prospects are keeping a lid on the number. I would pay some attention to this. As I outlined above, the consumer sector is quite important at the moment, and discretionary spending is dependent on moderate optimism.