Market Economics | Interest Rate Strategy - BNP PARIBAS ...
Market Economics | Interest Rate Strategy - BNP PARIBAS ...
Market Economics | Interest Rate Strategy - BNP PARIBAS ...
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Key Data Preview<br />
10<br />
5<br />
0<br />
-5<br />
-10<br />
-15<br />
-20<br />
-25<br />
-30<br />
-35<br />
-40<br />
Chart 9: Eurozone Sentiment by Sector<br />
Consumer<br />
Industry<br />
Construction<br />
99 00 01 02 03 04 05 06 07 08 09 10 11<br />
Source: Reuters EcoWin Pro<br />
Jan (f) Dec Nov Oct<br />
Economic Sentiment 106.4 106.2 105.1 103.8<br />
Industry 5 4 1 0<br />
Services 9 10 10 8<br />
Consumer -11 -11 -9 -11<br />
Key Point:<br />
Sentiment remains elevated but divergence persists<br />
at the sectoral and national level.<br />
<strong>BNP</strong> Paribas Forecast: Internal Divergence<br />
Eurozone: Economic Sentiment (January)<br />
Release Date: Thursday 27 September<br />
The eurozone economic sentiment index improved in eight<br />
of the nine months to December, reaching its highest level<br />
since October 2007 prior to the financial crisis.<br />
The key driver of the improvement in sentiment has been<br />
the industrial sector, which has the highest weighting of the<br />
five main sub-sectors (at 40% of the total). Other leading<br />
indicators for the sector, including the manufacturing PMI,<br />
remain elevated, implying that sentiment will continue to do<br />
well, supported by strong global demand.<br />
The domestically-driven sentiment sub-surveys, like retail<br />
and consumer confidence, have fared less well. This is due<br />
in part to austerity programmes in the economies with their<br />
public finances in worst shape.<br />
In the core countries, and Germany in particular, the overall<br />
level of sentiment is much more elevated and domesticallydriven<br />
sub-surveys have done comparatively well. The gap<br />
between the level of consumer sentiment in Germany and<br />
for the eurozone as a whole is at a record high.<br />
Surveys of price expectations in the household sector have<br />
risen sharply from 2009’s lows, as have pricing intentions<br />
of industrial firms, linked to commodity price trends. They<br />
remain well below past peaks, however.<br />
Chart 10: Germany Preliminary CoL<br />
Source: Reuters EcoWin Pro<br />
Jan (f) Dec Nov Oct<br />
CoL m/m -0.5 1.0 0.1 0.1<br />
CoL y/y 1.8 1.7 1.5 1.3<br />
HICP m/m -0.5 1.2 0.1 0.1<br />
HICP y/y 2.0 1.9 1.6 1.3<br />
Key Point:<br />
We expect a further acceleration, led by food and<br />
core prices.<br />
<strong>BNP</strong> Paribas Forecast: Further Acceleration<br />
Germany: Preliminary Cost of Living (January)<br />
Release Date: Thursday 27 January<br />
We expect headline CPI inflation to accelerate further in<br />
January, up by 0.1pp point to 1.8% y/y – the highest since<br />
October 2008. We expect the HICP measure to rise by the<br />
same margin, to 2.0% y/y.<br />
The acceleration is likely to be largely due to a combination<br />
of higher core inflation and food prices while energy<br />
inflation ticks lower. More specifically, food prices are likely<br />
to continue accelerating in y/y terms as the CPI catches up<br />
with the jump in soft commodities during late 2010.<br />
Rising core inflation is likely to be driven by the clothing<br />
and household goods components. Clothing should<br />
accelerate mainly due to base effects related to a<br />
substantial drop last January that we don’t expect to be<br />
repeated this January. It is a similar story for household<br />
goods.<br />
Energy inflation is likely to reflect two opposing forces.<br />
Rising utility bills should add to inflation but be more than<br />
offset by the fall in transport prices as fuel costs rose by<br />
less than they did during the same month a year earlier.<br />
<strong>Market</strong> <strong>Economics</strong> 20 January 2011<br />
<strong>Market</strong> Mover<br />
75<br />
www.Global<strong>Market</strong>s.bnpparibas.com