Market Mover - BNP PARIBAS - Investment Services India

Key Data PreviewChart 3: Japanese Production and Exports120(2005=100, seasonally adjusted)150115140110Production1301051201001109510090859080Exports (RHS)8075707060655000 01 02 03 04 05 06 07 08 09 10 11Sources: METI. MOF, BNP ParibasSep (f) Aug Jul Jun% m/m -2.0 0.6 0.4 3.8BNP Paribas Forecast: First Decline in Six MonthsJapan: Industrial Production (September)Release Date: Friday 28 OctoberWe expect industrial production in September to fall by 2.0%m/m, marking the first setback in six months. Productionlevels in July have largely returned to normal (i.e., predisasterlevel of February), but if distortions in the seasonaladjustments are excluded, the pace of production growth hasbeen moderating of late. On this score, the productionforecast index also projects a pause in the recovery inSeptember (-2.5%) followed by resumed growth (3.8%) inOctober. Factory activity continues to be underpinned byreconstruction and ramped-up production by car makers whoare making up for lost production after the disaster. However,the outlook is not entirely bright, as downside risks for theglobal economy have increased, with both developed andemerging economies losing momentum. We expect slowingexports to cause factory recovery to stall around year-end.Key Point:Output should decline in September and then resumerecovery on reconstruction demand and catch-upproduction by car makers. But the slowing globaleconomy will be likely to cause the factory recovery tostall around year-end.543210-1-2-3Chart 4: French Retail Sales vs. ConfidenceRetail Sales (% y/y, volume)Household Confid.(EU Survey, RHS)04 05 06 07 08 09 10 11Source: INSEE, Reuters EcoWin ProVolume (sa-wda) Sep (f) Aug Jul Sep 10% m/m -0.7 0.2 -0.2 0.9% y/y -1.3 0.3 -1.4 1.9Key Point:Poor household confidence points towards a drop insales after the holiday period.50-5-10-15-20-25-30-35-40BNP Paribas Forecast: DecliningFrance: Retail Sales (September)Release Date: Friday 28 OctoberReal retail sales were fairly stable in July and August afterthe June 0.9% m/m gain. The sharp decline of householdconfidence, when the fears of economic downturn werespreading, and the intensification of the financial crisisapparently failed to hit consumption.The breakdown shows a slightly different picture. Sales ofdurable goods diminished as consumers restrainedexpenditure. During the summer, relatively strong activity intourism, despite adverse weather, compensated for this.Sales of miscellaneous goods and energy (petrol and diesel)were up and we believe activity in services was robust. Thismay change in September. Sales of energy should declinefrom their previous peak. Because of poor confidence, we donot expect a rebound in sales of manufactured goods,especially durable goods. The exception may be car saleswhere manufacturers’ discounts have probably helped, butthe y/y change is sure to decline rapidly over the comingmonths because of a strong base effect.The only sector where there is potential for a recovery is foodsales. These should rebound from an abnormally low level.However, the German experience where retail sales in realterms declined continuously for years after reunification,shows a rebound is not guaranteed. The poor economicsituation may result in a similar situation in France, wherepeople abandon traditional brands, shops and supermarketsin favour of hard discounters, showing up in the data in theform of a continuous sales decline in real terms.Market Economics 27 October 2011Market Mover72www.GlobalMarkets.bnpparibas.com