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Chart 9: Eurozone Sentiment by Sector
Consumer
Industry
Construction
99 00 01 02 03 04 05 06 07 08 09 10 11
Source: Reuters EcoWin Pro
Jan (f) Dec Nov Oct
Economic Sentiment 106.4 106.2 105.1 103.8
Industry 5 4 1 0
Services 9 10 10 8
Consumer -11 -11 -9 -11
Key Point:
Sentiment remains elevated but divergence persists
at the sectoral and national level.
BNP Paribas Forecast: Internal Divergence
Eurozone: Economic Sentiment (January)
Release Date: Thursday 27 September
The eurozone economic sentiment index improved in eight
of the nine months to December, reaching its highest level
since October 2007 prior to the financial crisis.
The key driver of the improvement in sentiment has been
the industrial sector, which has the highest weighting of the
five main sub-sectors (at 40% of the total). Other leading
indicators for the sector, including the manufacturing PMI,
remain elevated, implying that sentiment will continue to do
well, supported by strong global demand.
The domestically-driven sentiment sub-surveys, like retail
and consumer confidence, have fared less well. This is due
in part to austerity programmes in the economies with their
public finances in worst shape.
In the core countries, and Germany in particular, the overall
level of sentiment is much more elevated and domesticallydriven
sub-surveys have done comparatively well. The gap
between the level of consumer sentiment in Germany and
for the eurozone as a whole is at a record high.
Surveys of price expectations in the household sector have
risen sharply from 2009’s lows, as have pricing intentions
of industrial firms, linked to commodity price trends. They
remain well below past peaks, however.
Chart 10: Germany Preliminary CoL
Source: Reuters EcoWin Pro
Jan (f) Dec Nov Oct
CoL m/m -0.5 1.0 0.1 0.1
CoL y/y 1.8 1.7 1.5 1.3
HICP m/m -0.5 1.2 0.1 0.1
HICP y/y 2.0 1.9 1.6 1.3
Key Point:
We expect a further acceleration, led by food and
core prices.
BNP Paribas Forecast: Further Acceleration
Germany: Preliminary Cost of Living (January)
Release Date: Thursday 27 January
We expect headline CPI inflation to accelerate further in
January, up by 0.1pp point to 1.8% y/y – the highest since
October 2008. We expect the HICP measure to rise by the
same margin, to 2.0% y/y.
The acceleration is likely to be largely due to a combination
of higher core inflation and food prices while energy
inflation ticks lower. More specifically, food prices are likely
to continue accelerating in y/y terms as the CPI catches up
with the jump in soft commodities during late 2010.
Rising core inflation is likely to be driven by the clothing
and household goods components. Clothing should
accelerate mainly due to base effects related to a
substantial drop last January that we don’t expect to be
repeated this January. It is a similar story for household
goods.
Energy inflation is likely to reflect two opposing forces.
Rising utility bills should add to inflation but be more than
offset by the fall in transport prices as fuel costs rose by
less than they did during the same month a year earlier.
Market Economics 20 January 2011
Market Mover
75
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