Market Mover - BNP PARIBAS - Investment Services India

Key Data PreviewChart 5: US Confidence vs. ConsumptionSources: Reuters EcoWin Pro% m/m Sep (f) Aug Jul JunPersonal Income 0.5 -0.1 0.3 0.2Consumption 0.4 0.2 0.8 -0.1Core PCE Prices 0.0 0.1 0.2 0.2BNP Paribas Forecast: Flat to DownUS: Personal Income & Spending (September)Release Date: Friday 28 OctoberPersonal consumption is forecast to rise 0.4% in Septemberafter a 0.2% gain in August. Nominal core retail sales rose arobust 0.6%, and auto sales jumped 4.9%. However, adecline in utility spending should weigh on service spending,which comprises 2/3 of all personal spending. Overall, thegain would be consistent with a moderate rebound inconsumption growth in Q3.Meanwhile, personal income is forecast to rise a solid 0.5%after a decline of 0.1% reflecting the rise in both aggregatehours worked and average hourly earnings. Income appearsto have grown notably more slowly in Q3 than spending,suggesting a decline in the personal saving rate.The core PCE price index is expected to be flat inSeptember, down from a 0.1% m/m rise in September. Themoderation in core inflation momentum should come fromlower OER and core goods price inflation. This would leavethe annual pace of core PCE inflation at 1.6%.Key Point:A jump in auto sales is expected to lead to robustpersonal spending in September.Chart 6: Eurozone Inflation Breakdown (% y/y)3.02.52.01.51.00.50.0EnergyFood-0.5Core01/10 07/10 01/11 07/11Source: Reuters EcoWin Pronsa Oct (f) Sep Aug JulFlash estimate (% y/y) 2.9 3.0 2.5 2.5Key Point:Food, energy and core are forecast marginally lower inOctober, which should allow a one-tenth decline inheadline inflation.BNP Paribas Forecast: Marginal EasingEurozone: Flash HICP Inflation (October)Release Date: Monday 31 OctoberThe eurozone inflation rebound in September was primarilythe correction of abnormally low data in the preceding twomonths, which affected the contribution of core items (seeChart). Things returned to normal in September and weexpect this to prevail until the end of the year.The main source of volatility has been the energy componentfor the last few years. We forecast this item to be fairly stablein October, printing a modest increase on the month around0.4%, but allowing for a modest decline, by about two-tenths,of the y/y inflation of that item (from 12.4% in September).The favourable base effect will be particularly significant inDecember, January and March; three months during whichenergy prices rose between 2% and 3% m/m last winter.The trend increase in food prices should continue. However,the mild weather in September may have caused fresh foodprices to ease temporarily; this should compensate for risingprices in manufactured foods.Finally, core inflation reached 1.64% in September, slightlyabove the June level, 1.57%. We expect core inflation to stayaround this level until year-end. The inflationary impact ofpast increases in crude goods prices has not been entirelypassed on to consumers. However, declining privateconsumption, evident throughout the eurozone, should makeit difficult for manufacturers and retailers to hike pricessignificantly. We forecast headline inflation at 2.9%.Market Economics 27 October 2011Market Mover73www.GlobalMarkets.bnpparibas.com