Market Outlook - BNP PARIBAS - Investment Services India

Key Data Preview
Chart 13: US NM ISM Components
Source: Reuters EcoWin Pro
Jan (f) Dec Nov Oct
NM Composite 51.5 50.1 48.7 50.6
Prices Paid 57.5 58.7 57.8 53.0
Key Point:
The ISM services index is expected to improve to
51.5 in January
BNP Paribas Forecast: Up
US: ISM Non Manufacturing (January)
Release Date: Wednesday 3 February
The ISM non-manufacturing index improved to 50.1 in
December from a reading of 48.7 previously, but the index
remained below the recent high of 50.9 recorded in
September. We believe the index will reach 51.5 in
January. Several factors suggest economic prospects in
the non-manufacturing sector are improving, although the
pace of improvement remains moderate. Initial claims
declined in January, but continuing claims including
emergency and extended programmes still remain at
record highs. ISM Production has been quite strong lately
as improving global trade and the upswing of the inventory
cycle stimulate activity, but NM ISM new orders seem to
lag positive improvements in the manufacturing sector.
Nevertheless, seven non-manufacturing industries
indicated growth in December, including Retail Trade: "The
environment seems to be improving, but we will continue to
be cautious as we look forward". Nine industries still
reported contraction. Overall, we expect the upward trend
in NM ISM to continue into January and the number of
industries reporting growth to increase.
Chart 14: Level of German Output & Orders
120
115
110
105
100
95
90
85
80
75
Index Levels, 2005=100
Output
70
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Source: Reuters EcoWin Pro
Orders (RHS)
Dec (f) Nov Oct Sep
Output % m/m 1.5 0.7 -1.7 3.0
Output % y/y -2.7 -8.0 -12.4 -12.6
Orders % m/m 1.0 2.8 -1.9 1.3
Orders % y/y 10.4 1.3 -8.3 -12.6
Key Point:
Leading indicators suggest further ‘catch-up’ for
orders and output.
130
120
110
100
90
80
70
60
BNP Paribas Forecast: Still Strengthening
Germany: Industrial Production & Orders (December)
Release Date: Thursday 4 & Friday 5 February
Leading indicators of industrial production and orders point
to further increases in the period ahead. The PMI for the
manufacturing sector rose for the twelfth month in a row in
January, reaching its highest level since mid-2008. The
sub-index for output rose sharply, to 58.4, five percentage
points above its long-run average.
On the basis of the signals from the surveys, we look for a
strong 1.5% m/m increase in production in December. This
would imply a 1.8% q/q rise in industrial output for Q4 as a
whole, the second successive strong gain and consistent
with a further expansion in GDP in Q4.
Given the exceptionally large gain in manufacturing orders
in November, 2.8% m/m, we look for a moderation in the
rate of increase in December. Still, given our forecast of a
1% m/m rise, orders in Q4 as a whole will have increased
by almost 2% q/q, the third strong q/q gain in succession.
Given favourable base effects relating to the collapse in
activity in late 2008 and early 2009, y/y rates of change will
continue to rise sharply in coming months. The y/y rate of
change in orders has already turned positive and output
should follow suit from January onwards.
Despite the near-10% rebound since April 2009, the level
of industrial production remains around 15 percentage
points below its peak in spring 2008.
.
Market Economics 29 January 2010
Market Mover 22 62
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