(Week of 23 to 29 March 2009)
- German ifo business climate (March): down
- PMI manufacturing indices Germany and EMU (March): down
- M3 growth (February): subdued
- German CPI (March): retreating to 0.6% yoy
The ifo business climate for Germany will probably have deteriorated in March; both the current assessment and business expectations are likely to have declined. The German ZEW economic sentiment and the US ISM manufacturing index only improved slightly. The German yield spread has improved, because shortterm interest rates have continued decreasing, while long-term rates have been fluctuating at low levels. The crude oil price seems to have stabilised at its present low level. However, the DAX has declined and the euro has appreciated recently.
For similar reasons, French and Italian business confidence are likely to have deteriorated in March, whereas Belgian business confidence could have recovered from its setback in February. All in all, the Purchasing Managers' Indices for the German and EMU manufacturing sector are expected to have deteriorated in March. In the same period, French consumer confidence might have remained unchanged at least, but Italian consumer confidence and the German GfK consumer confidence for April could have declined, after having improved unexpectedly in the preceding months.
For the same reason, plus the fact that French consumer confidence deteriorated, French consumer spending is likely to have suffered a setback in February too. EMU industrial new orders are expected to have decreased further in January, just as German industrial new orders did. Following their seasonal patterns, the EMU trade balance and current account are likely to have deteriorated substantially in January. The decrease in French GDP in Q4 2008 might turn out to be even larger after its revision.
EMU money supply M3 fell by €75bn in January, the steepest decline on record. The decline is partly due to a shift of funds out of the interest bearing components of M3 into longer term bank liabilities. However, special factors (turn of the year) might have played a role, too. We expect monetary expansion to remain subdued, as credit growth is falling and low short term interest rates make it less attractive to hold term deposits or money market funds. The annual rate of M3 growth could have declined from 5.9 to 5.3% in February. Credit growth is likely to have fallen from 5.0 to about 4.5%.
The preliminary results for national German CPI for March are due to be released on Friday at the latest. We expect German consumer prices to have remained unchanged month-on-month; the annual rate would fall to 0.6%. Prices for accommodation services and package tours are expected to have gone down. Moreover, energy prices have fallen in March.
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