EMU Economic Indicators Preview (Week of 14 to 20 December 2009)

• German ifo business climate (December): up
• German ZEW economic sentiment (December): unchanged
• PMI manufacturing index EMU (December): up
• EMU industrial production (October): slightly down

EMU industrial production could have decreased in October, as the corresponding national figures sent mixed signals. Following their usual seasonal pattern, the EMU trade balance and current account are expected to have improved in October, just like the corresponding German figures.

Harmonised consumer prices in Italy for October are unlikely to be revised significantly. Final HICP inflation in the eurozone will probably be revised downwards somewhat in November to 0.5% yoy; this would correspond with a monthly inflation rate of 0.2%. In December and January, year-on-year inflation will probably increase further. However, inflation rates are expected to remain well below the European Central Bank's target over the course of next year.

The German ZEW economic sentiment is likely to have remained more or less stable in December. The ifo business expectations have improved, but the US ISM manufacturing index has deteriorated. German yield spreads widened initially, but have now narrowed again, just like long-term interest rates, whereas short-term rates have remained stable. The euro appreciated initially, but has since depreciated. The DAX and crude oil prices have been fluctuating around high levels.

However, the ifo business climate for Germany, French business confidence and the Purchasing Managers' Indices for the manufacturing sector in Germany and in the EMU could have improved somewhat in December, because current assessments are likely to have gone up, unlike business expectations.

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