MARKET MOVER - BNP PARIBAS - Investment Services India

Key Data Preview
Chart 7: UK CIPS Manufacturing vs FMCI
Source: Reuters EcoWin Pro
Sep (f) Aug Jul Jun
53.0 54.3 56.9 57.5
Key Point:
We expect the CIPS to fall again in September, with
further downside potential in the coming months.
BNP Paribas Forecast: Down Again
UK: CIPS Manufacturing (September)
Release Date: Friday 1 October
We expect the manufacturing sector CIPS to continue to
fall in September, by 1.3 points to 53.0; this would be the
lowest since November 2009. Prior to August, the CIPS
had clearly topped out but had managed to avoid the falls
that had been experienced in other major economies. That
came to an end in August, when the index fell by 2.6
points.
The fall was consistent with the tightening in financial and
monetary conditions highlighted by our FMCI (chart). The
same relationship points to further downside in September.
Furthermore, the orders-inventories balance tends to
provide a guide to future trends in the output component
and indeed the headline index. At current levels, this
relationship points to a sub-50 reading on the headline
CIPS over the next three months.
In combination with the OECD leading indicator, the drop in
the CIPS so far and the likelihood that this trend continues
points to a contraction in output by the end of the year.
Output never caught up with the peaks in the survey
indicators, which probably highlighted relief that the
recession was over. The drop in surveys is partly a
correction of that over-optimism but is also likely to reflect a
genuine slowing in hard output.
Chart 8: US Confidence vs Consumption
Source: Reuters EcoWin Pro
% m/m Aug (f) Jul Jun May
Personal Income 0.3 0.2 0.0 0.3
Consumption 0.3 0.4 0.0 0.1
Core PCE Prices 0.1 0.1 0.0 0.1
BNP Paribas Forecast: Modest Gains
US: Personal Income & Spending (August)
Release Date: Friday 1 October
Personal consumption is forecast to rise 0.3% in August
after a 0.4% gain in July as rising gasoline prices and a
moderate gain in core sales spurred by back-to-school
spending more than offset a decline in auto sales. Looking
through the gain in prices, our forecast would imply a
relatively subdued 0.1% increase in real spending as
consumers remain cautious about allocating their
purchasing power.
Personal income is forecast to rise by 0.3% after a 0.2%
gain a month prior as the increase in hours worked and
solid gain in average hourly earnings should support wage
and salary income.
The core PCE price index is expected to rise 0.1% despite
the flat reading on core CPI as the weakness in the CPI
reading was driven by a softening in owner’s equivalent
rent (this is weighted less heavily in the PCE measure).
Our forecast would leave the annual rate steady at 1.4%.
Key Point:
We expect modest gains in income and spending and
a steady reading for core inflation.
Market Economics 23 September 2010
Market Mover
61
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