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Key Data Preview
Chart 5: UK Manufacturing Production vs CIPS
Source: Reuters EcoWin Pro
Mar (f) Feb Jan Dec
Ind Prod % m/m 0.2 0.9 -0.5 0.5
Ind Prod % y/y 0.3 -0.1 -1.4 -3.6
Man Prod % m/m 0.4 1.3 -0.9 0.9
Man Prod % y/y 1.5 1.4 0.1 -2.0
Key Point:
We expect manufacturing production to post a
robust gain, consistent with upbeat surveys and
accommodative policy conditions.
BNP Paribas Forecast: Robust Expansion
UK: Industrial Production (March)
Release Date: Tuesday 11 May
We expect UK industrial production to post a 0.2% m/m
gain in March, underpinned by a more rapid acceleration in
manufacturing production. We expect manufacturing to
expand by 0.4% m/m.
Manufacturing output is being boosted by accommodative
financial and monetary conditions, as seen in the
depreciation in the effective GBP exchange rate and loose
monetary policy. This has helped to push the CIPS
manufacturing survey higher pretty much continuously for
the last year. We expect the buoyancy of the survey
indicators to translate into hard output over the coming
months. One minor risk is that the volatility in output over
recent months (which in turn reflected snow-related
disruption) may hold back the extent of the March
improvement. Nonetheless, the underlying trend should be
robust for a number of months.
Manufacturing aside, the initial breakdown of the Q1 GDP
data suggested that utilities output and mining and
extraction were weaker on the month. These are likely to
hold back the headline pace of output growth below that of
manufacturing.
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Chart 6: Eurozone GDP & PMI
Composite PMI
20
98 99 00 01 02 03 04 05 06 07 08 09 10
Source: Reuters EcoWin Pro
Eurozone GDP % (q/q, RHS)
Seas. Adjusted Q1 10(f) Q4 09 Q3 09 Q2 09
GDP % q/q 0.1 0.0 0.4 -0.1
GDP % y/y 0.4 -2.2 -4.1 -4.9
Key Point:
Weather effects and weak consumer spending will
weigh on Q1 growth though leading indicators point
to stronger growth in Q2.
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1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
BNP Paribas Forecast: Weak Start
Eurozone: GDP (Q1 2010, ‘Flash’ Estimate)
Release Date: Wednesday 12 May
While the recent sentiment surveys signal an improvement
in GDP growth going forward (see chart), the ‘hard’ activity
data released for Q1 to date suggest that GDP is likely to
show a marginal q/q increase at best.
A significant drag will come from the impact of unusually
cold weather on the German construction sector, which
saw record declines in output at the start of the year.
Retail sales data in the eurozone also suggest that private
consumption is likely to remain weak in Q1. Sales were flat
on a q/q basis in Q1. We have to go back to Q1 2008 to
find a quarter in which private consumption even expanded
on a q/q basis in the eurozone. The weakness of the labour
market and fiscal consolidation measures in some member
states will continue to weigh on spending, with surveys of
spending intentions near record low levels.
The narrowing of the trade surplus in Q1 is also indicative
of a drag on GDP from net exports, unwinding the modest
boost from this area in Q4 last year.
The rebound in manufacturing activity points to a pick-up in
the rate of growth beyond Q1, but with domestic demand
still subdued and sentiment fragile given recent turbulence
in financial markets, the outlook remains difficult. Our GDP
growth estimate for 2010 remains at around 1%.
Market Economics 7 May 2010
Market Mover
73
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