Monday, April 27, 2009

EMU Economic Indicators Preview (Week of 27 April to 3 May 2009)

  • German CPI inflation (April): increasing temporarily
  • M3 growth (March): declining
  • EMU industrial confidence and economic sentiment (April): slightly better
  • German adjusted unemployment (April): sharper rise
  • EMU inflation flash estimate (April): up slightly

The German GfK consumer confidence for May and French consumer confidence for April might have remained unchanged at best, but Italian business and consumer confidence could have recovered, after having plummeted in March. Therefore, EMU economic sentiment and EMU industrial confidence will probably have improved in April.

The preliminary results for national German CPI for April are due to be released on Tuesday at the latest. We expect German consumer prices to have gone up by 0.2 % month-on-month; the annual rate would increase temporarily to 0.8%. Due to the Easter holidays, prices for accommodation services and package tours are likely to have increased.

Gasoline and heating oil prices have gone up too. As in preceding months, gas prices are expected to have gone down, whereas electricity prices will probably have risen again. The Eurostat flash estimate is likely to show that euro area inflation increased to 0.7% yoy in April. This would correspond with a monthly increase in HICP of 0.5 % in unadjusted terms.

We expect M3 growth to have remained subdued in March. However, individual components seem to be developing quite differently, mainly reflecting low short term interest rates and thus low opportunity costs of holding cash. Reservations regarding the banking system might also be playing a role. On the one hand, growth of overnight deposits has increased and money market funds have been attracting investors. Currency in circulation is actually rising at a rate of over 13% yoy, possibly supported by demand from eastern Europe. On the other hand, short term time deposits and bank debt securities have been declining rapidly. Overall, we expect M3 to have risen only moderately at 5.7% yoy. Credit growth is falling fast: growth of loans to the private non-bank sector could have declined to 3.2% yoy in March, down from 4.2%.

German unadjusted unemployment generally tends to decline noticeably after the winter months. The weather conditions have been favourable this April, but due to the sharp recession, unadjusted unemployment could nevertheless have gone up slightly, albeit somewhat less than in March. Thus adjusted unemployment could have risen by about 90,000 in April. The adjusted unemployment rate would reach 8.3%, 0.7 percentage points up on the cyclical low of 7.6% last November. The figures would be even worse by now if the government had not eased the terms for short-time work allowances: at the end of 2008, about 270,000 people worked short-time, compared to only 78,000 in December 2007.

The harmonized EMU unemployment rate could have gone up to 8.8% at least in March. In many European countries, particularly in Spain, unemployment has been rising since spring 2008, and it is now increasing rapidly in Germany too.


This report has been prepared by BHF-BANK Aktiengesellschaft on behalf of itself and its affiliated companies (together "BHFBANK Group") solely for the information of its clients.

The information and opinions in this document are based on sources believed to be reliable and acting in good faith, but no representation or warranty, express or implied, is made by any member of the BHF-BANK Group as to their accuracy, completeness or correctness. Opinions and recommendations are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute advice or personal recommendation, for which the duty of suitability would be owed, but may facilitate your own investment decision. Moreover, you should seek your own advice as to the suitability of an investment matter mentioned herein. Investors are reminded that the price of securities and the income from them can go down as well as up and that the past performance of an investment or a market is not necessarily indicative for future results.

This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete, and this document is not, and should not be construed as, an offer to sell or solicitation of any offer to buy the securities mentioned in it. BHF-BANK Group and its officers and employees may have a long or short position or engage in transactions in any of the securities mentioned in this document, or in any related securities.