Market Economics | Interest Rate Strategy - BNP PARIBAS ...

Key Data Preview
Chart 11: French Household Confidence Vs. CPI
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Inflation Rate (%y/y, inverted)
3.5
4.0
02 03 04 05 06 07 08 09 10
Source: Reuters EcoWin Pro
EU Commission Index (RHS)
New INSEE Index (RHS)
Diffusion Index, SA Jan 11 (f) Dec Nov Jan 10
INSEE indices:
Overall -38 -36 -33 -30
Buying opportunity -22 -21 -20 -21
EU Commis. Index:
Headline -18.5 -17.5 -16.6 -16.0
Key Point:
Higher food and energy prices are exerting
downward pressure on wage earners' purchasing
power and confidence.
5
0
-5
-10
-15
-20
-25
-30
-35
-40
-45
-50
BNP Paribas Forecast: Under Pressure
France: Household Confidence (January)
Release Date: Thursday 27 January
French household confidence fell heavily in December.
According to INSEE, the headline index lost 3 points,
pushing it down to its lowest level since July. This fall is
clearly due to accelerating inflation; in particular, food and
energy prices, to which households are highly sensitive,
have been rising sharply.
This caused a sharp drop in the personal financial situation
as well as living standards, both present and future.
Spending plans as well as expected savings fell as a result.
Since food and energy prices have increased further since
the December survey was carried out, January confidence
is unlikely to post any recovery. The improvement in the
labour market has been very slow recently, which does not
help. We forecast further deterioration of confidence, for
the same reasons as in December, though at a slower
pace.
What matters for economic growth is the impact on actual
private consumption. The INSEE indicators have
underestimated the level of consumption for several years,
and the situation is not as bad as it looks. However, the
deterioration is undeniable as the EU Commission index
shows.
Chart 12: US: Investment to Slow in Q4
Source: Reuters EcoWin Pro
BNP Paribas Forecast: Increase on Aircraft
US: Durable Goods (December)
Release Date: Thursday 27 January
Durable goods orders are expected to increase 2.1% m/m
in December, reflecting a solid increase in orders for
Boeing aircraft. Meanwhile, we look for orders ex
transportation to increase by 0.5% m/m after surging 3.6%
a month prior. The November ex-transportation reading
was the second-strongest monthly increase in 2010, largely
driven by defence orders and expected to reverse in
December. However, consistent with a similar dynamic in
other manufacturing indicators, we expect core capital
goods orders to improve by 1.5% m/m. We look for
equipment and software investment to moderate from
15.4% q/q a.r. in Q3, but still grow by a solid 5.0% in Q4.
% m/m Dec (f) Nov Oct Sep
Durable Goods 2.1 -0.3 -3.1 4.9
Ex-Transport 0.5 3.6 -2.0 1.1
Key Point:
Durable goods orders are expected to increase 2.1%
m/m in December, reflecting a solid increase in
orders for Boeing aircraft.
Market Economics 20 January 2011
Market Mover
76
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