February retail sales surprised friend and foe as they rose by 0.3% M/M instead of the expected 0.2% M/M drop. Still better, core sales that exclude cars and gasoline surged 0.9% M/M following a 0.5% M/M increase in January. So, while the harsh weather conditions might have been a negative, it wasn’t enough to keep consumers out of the shops. It seems that the recovery is broadening and Q1 2010 might turn out stronger than generally expected.
Consumer sentiment deteriorated in early March, according to a preliminary Michigan consumer sentiment survey, after sentiment already deteriorated in February. The headline index fell 1.1 points to 72.5, defying expectations for a small improvement. Taken together with the retail sales, it shows that a downbeat mood hasn’t too much of an effect on consumer spending.
Business inventories were flat in January, while sales gained 0.6% M/M. This pushed the inventory-to-sales ratio down to 1.25 months, the lowest since March 2006. This suggests that the inventory cycle is nearing the end and might be followed by some re-stocking. So, inventories may add to Q1 GDP, but less so than in Q4 2009, when large part of growth came from the slowing of inventory drawback.
EMU: Industrial production surges, easing fears of double dip
Industrial production surprised sharply on the upside. Indeed, in January, output surged 1.7% M/M, while the December figure, initially reported at a disappointing - 1.7% M/M was revised higher to a stunning 0.6% M/M increase. On a yearly basis, production is up 1.4%, the first positive year-on-year reading. The report is promising for Q1 of 2010 and now it seems that the hard data are catching up with the more upbeat survey results.
