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German industrial new orders will probably have rebounded in February

Mon, Mar 31 2008, 05:38 GMT
by BHF-Bank Economics Department

BHF-Bank

• German retail sales might have increased again in February

• EMU industrial confidence and economic sentiment are likely to have improved in March

• The German adjusted unemployment rate could have declined slightly to 7.8 % in March

• M3 growth probably slowed down to 11.4% yoy in February

• The flash estimate for March is likely to show EMU inflation rising to at 3.4 % yoy

German industrial new orders might have rebounded in February, because most of the correlated climate indicators improved. German retail sales are expected to have increased in February, as retailers’ business assessment had soared. However, consumer confidence had deteriorated.

EMU industrial confidence and economic sentiment could have improved in March, just like many of the corresponding national figures. The RBS purchasing managers’ indices for the German and the EMU manufacturing sector for March are not likely to have been revised substantially.

Adjusted unemployment fell by 75k in February, more markedly than expected. This was mainly due to relatively mild temperatures and the relief offered by the winter short-time allowance. However, weather conditions in March have been rather bad. Thus we are expecting German adjusted unemployment to have dropped by 52k only in March. Unadjusted unemployment is likely to have continued declining at a slower pace yoy.

The harmonised EMU unemployment rate probably fell slightly again by 0.1 percentage points to 7.0% in February, due to the favourable German figures.

M3 growth in the euro area will probably have remained fairly strong in February. In general, the yield curve has been flat or even inverted, thus offering little incentive for longer term investments. We expect M3 to have risen at an annual rate of about 11.4%, slightly less than in January. This would amount to a monthly increase of about €68bn, somewhat below the 6-month average. Credit growth (MFI loans to domestic private non-financial sectors) is likely to have slowed from 11.1 to 11.0% yoy.

The Eurostat flash estimate is likely to show that euro area inflation has accelerated slightly to 3.4% yoy in March. This would correspond with a monthly increase of 0.8% in unadjusted terms. The monthly inflation increase is likely to have been due to record high crude oil prices and typical seasonal factors, as prices for clothes, accommodation services and package tours surged. Moreover, food prices could have gone up for the euro area as a whole like in Germany.

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Published on  Mon, Mar 31 2008, 10:30 GMT