The NY Empire State manufacturing index dropped to a new record low in February, after showing some signs of improvement in January. The headline index plunged to -34.65 (from -22.20) in February, while the consensus was looking for only a modest decline. The breakdown showed a more mixed picture with a decline in new orders (-30.51 from -22.81), number of employees (-39.08 from -26.14) and average workweek (-31.03 from -23.86). Producers became a bit less pessimistic about shipments (-8.13 from -13.12), inventories (-8.05 from -19.32) and unfilled orders (-24.14 from -26.14). This weaker than expected figure might indicate that last month’s improvement in business sentiment was only temporary and a recovery is not yet around the corner, but should be confirmed by the other surveys, starting by the Philly Fed survey on Thursday.
The February NAHB (homebuilders’ sentiment) survey showed a marginal improvement from historical low levels, suggesting that despite the “improvement” homebuilders remain very pessimistic. The headline index rose to 9 from 8 in January, but remains very far from the 50 neutral levels. NAHB said that rising foreclosures, excess inventories and nose-diving home prices continue to depress activity in the sector.
EMU: German ZEW shows fourth straight increase
The German ZEW index that surveys confidence of analysts and investors showed its fourth consecutive improvement in February. The headline, expectations index rose from -31.0 to -5.8, while the consensus was looking for an outcome of -25.0. The current situation on the contrary deteriorated from -77.1 to -86.2. The fourth monthly increase is encouraging, but in recent months, the index lost much of its correlation with other confidence indicators. Therefore, one shouldn’t become too enthusiastic, but wait for other more reliable confidence indicators like the IFO.
In December, the euro zone trade deficit narrowed unexpectedly. The trade balance rose from an upwardly revised -4.0B to -0.3B due to slump of 3.9% M/M in imports, while exports declined by 0.9% M/M. In the coming months, both imports and exports are forecasted to decline further.
Other: UK inflations falls less than expected
In the UK, CPI dropped less than expected in January. On a monthly basis, CPI fell by 0.7% M/M, while the consensus was looking for a decline by 1.0% M/M. Core CPI, excluding food and energy, rose to 1.3% Y/Y (from 1.1% Y/Y). Looking at the details, fares, travel costs (-6.5% M/M), clothing & footwear (-3.9% M/M), household goods (-3.6% M/M) and housing (-2.5% M/M) declined sharply. UK inflation is now at a 9-month low and is expected to decline further in the coming months. While the outcome fell shy of expectations, it shouldn’t affect monetary policy as it doesn’t change the disinflationary environment.
