EU Confidence, German Output, US credit
Saxo Bank | Jul 08, 2013 06:30AM ET
Investor sentiment for the Eurozone is expected to brighten again in today’s monthly update from Sentix, although industrial production for Germany may be weak in the release for May that follows. Later, US consumer credit will probably deliver another upbeat number for anticipating higher spending in this year’s second half.
EU Sentix Investor Confidence (08:30 GMT): Is there any hope for growth for the Eurozone overall? It’s still hard to be optimistic, but there are some small points of light to consider. Last week’s surprisingly upbeat retail sales gain in May for the EU is one example. Meanwhile, the Eurozone recession eased last month, according to the final June data for the Eurozone Composite PMI. Germany posted some growth while the pace of contraction slowed in France, Italy and Spain, Markit Economics advised. The Composite PMI closed out last month at 48.7. That’s still below the neutral 50 mark, but it’s the highest since March 2012.
Is there more evidence that the recession’s bite is fading? Investors are inclined to think positively, or so the revival in the Sentix Investor Confidence Index in the last two months suggests. Although the overall mood is still pessimistic, according to this benchmark, the neutral zero mark now looks within reach once again. If today’s update for June inches higher, which a number of analysts think is likely, we’ll have another reason to think that the second half of 2013 will look relatively better than the first half for Europe’s macro profile. Growth per se is still elusive for the continent overall, but at least the prospects for stabilisation are looking better.
Germany Industrial Production (10:00 GMT): The pace of industrial output is widely expected to slow if not contract in today’s update for May. The setback shouldn’t come as a great shock after considering the recent slump in factory orders. For the past two months through May, orders slipped. Growth in industrial production, by contrast, has been accelerating recently. The divergence isn’t likely to persist.
“German industry still has difficulties to return to full strength,” a Brussels-based economist tells Bloomberg. “Still-reasonably filled order books should ensure a gradual pick-up in industrial production. However, the medium-term outlook is not yet looking rosy.” Today’s update will serve as a reminder that with Europe is still struggling to pull out of recession, which means that Germany’s prospects for anything better than modest growth remain limited.
US Consumer Credit (19:00 GMT): Is consumer spending poised to accelerate? There are several encouraging economic reports that point in this direction. Last week’s better-than-expected payrolls report for June is one. A revival in retail sales in May is another. And the June data for auto sales reveals that demand for these big-ticket items increased at the strongest pace in five years.
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There’s a decent rate of macro momentum as the year’s second half begins, and today’s update on consumer credit is expected to strengthen confidence for expecting that the months ahead will be kind for the trend in spending. Indeed, total consumer credit outstanding has been consistently rising in recent months and more of the same is projected for the May data. The consensus forecast sees credit rising by USD 13 billion in today’s release, which would match the average monthly increase over the past year. In that case, we’ll have another data point that suggests that the virtuous cycle of an expanding labour market and higher consumer spending will roll on for the near term.
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