Market Outlook - BNP PARIBAS - Investment Services India

Key Data Preview
Chart 9: UK Composite CIPS vs GDP
Source: Reuters EcoWin Pro
Jan (f) Dec Nov Oct
52.5 54.1 51.8 53.4
Key Point:
We expect a weather-induced setback in the CIPS
surveys during January.
BNP Paribas Forecast: Down
UK: CIPS Manufacturing (January)
Release Date: Monday 1 February
We expect the UK CIPS manufacturing survey to suffer a
setback during January, falling by more than a point to
52.5. The reason is disruptions to orders and output
caused by inclement weather. The worst snow for several
decades prevented employees from getting to work,
deliveries from arriving at their intended destinations and
backlogs at ports and airports.
The flash estimate for the eurozone PMI was weaker than
expected, and this was attributed to the weather. We
estimate that UK GDP during Q1 could be reduced by
around 0.1 percentage points based on an assumption of a
small proportion of the working population being absent
from work during the height of the disruptions. To be
consistent with this, the CIPS survey should experience a
temporary loss of thrust.
Fundamentally, the outlook for the CIPS remains broadly
upbeat. Financial and monetary conditions remain
considerably looser than the long-run average, consistent
with further headway for the survey indicators. Output has
yet to feel the full benefit of the rebound in overseas
demand from the artificially depressed levels at the height
of the credit crunch. Hence we expect the likely setback in
January to be temporary.
Chart 10: US Confidence vs Consumption
Source: Reuters EcoWin Pro
% m/m Dec (f) Nov(f) Oct Sep
Personal Income 0.2 0.4 0.3 0.3
Consumption 0.2 0.5 0.6 -0.6
Core PCE 0.1 0.0 0..2 0.1
Key Point:
Income and consumption are both forecast to rise in
December by 0.2%. The deflator will increase by
0.1%, cutting their growth in half in real terms.
BNP Paribas Forecast: Modest Rises
US: Personal Income & Spending (December)
Release Date: Monday 1 February
Personal consumption is forecast to increase by 0.2% in
December as consumers participated in relatively subdued
holiday spending following two months of substantially
larger gains. Most of the spending has been on goods,
mainly vehicles in October, general merchandise in
November and gasoline and drugs in December. While up
from 12 months earlier, holiday spending relative to
November was limp. Consumers have supported their
burst of spending on goods by curtailing their expenditure
on services. Income growth in December is also forecast to
grow by 0.2%. Another month of declining employment
(-0.01%) combined with a relatively modest increase in
hourly earnings of 0.16% pushes wages and salaries up by
0.1% and larger increases in non-wages boost incomes.
Therefore income growth for 2009 is nudged forward by
0.2% from last December. In contrast, consumption is
forecast to rise by 3.7% over 2009. Fortunately, the 2009
fiscal stimulus act lowered tax rates and therefore caused
disposable income to rise 3.5% y/y, faster than income.
Faster growing DPI during 2009 helped preserve the
savings rate around the same level: 4.7%, the same as in
December 2008. The personal consumption deflator is
forecast to rise by 0.1% in December and thus increase by
2.1% y/y, up from 0.6% in 2008. The core deflator is
forecast to rise by 0.1% and 1.4% y/y, down from 1.8% in
2008.
Market Economics 29 January 2010
Market Mover 22 60
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