MARKET MOVER - BNP PARIBAS - Investment Services India

Key Data Preview
Chart 11: Japanese Production and Exports
120
115
110
105
100
95
90
85
80
75
70
65
(2005=100, seasonally adjusted)
00 01 02 03 04 05 06 07 08 09 10
Source: METI, BNP Paribas
Production
Exports (RHS)
150
140
130
120
110
100
90
80
70
60
50
Aug (f) Jul Jun May
% m/m 1.5 -0.2 -1.1 0.1
Key Point:
Production in August should firmly expand thanks to
a surge in last-minute demand for cars ahead of the
end of a stimulus programme.
BNP Paribas Forecast: Strong Growth
Japan: Industrial Production (August)
Release Date: Thursday 30 September
We expect production in August to be up 1.5% m/m,
rebounding from two months of decline. But the weak tone
of production since spring should not be taken at face
value, as distortions in the METI’s seasonally-adjusted data
– both the production index and forecast index – have
resulted in a downward bias in readings for Q2 and Q3.
Thus, the actual state of production in August is probably
stronger than indicated by the METI data. In any event,
production in August is likely to get a big boost from the
surge in last-minute demand for cars ahead of the
September termination of subsidies for buying eco-friendly
models. Output in other key sectors should also remain
firm thanks to solid export growth and the revival of
domestic appetite for capital investment. Although negative
payback for the fiscal stimulus programmes could cause
production to momentarily lose some steam moving
forward, so long as export growth does not come to an
abrupt end, the factory sector recovery should continue. As
for fallout from yen appreciation, a strong yen squeezing
profits is certainly is a headwind for producers, but
currency appreciation is a price shock, rather than a
demand (quantity) shock. There should thus be only limited
short-term impact on export volume and production.
Source: Reuters EcoWin Pro
Chart 12: Eurozone HICP
% Sep (f) Aug Jul Jun
HICP m/m 0.2 0.2 -0.3 0.0
HICP y/y 1.8 1.6 1.7 1.4
HICP Core m/m 0.2 0.4 -0.5 0.0
HICP Core y/y 1.0 1.0 1.0 0.9
Key Point:
Inflation should rise to 1.8%, driven up by food
inflation and energy price base effects.
BNP Paribas Forecast: Up On Food & Energy
Eurozone: Flash HICP (September)
Release Date: Thursday 30 September
In August, inflation moderated on energy price base
effects, and in September, they will be in play once again.
A 1.3% m/m decline in energy prices last September will
not be repeated this month, mechanically pushing energy
inflation higher.
Food inflation should also rise further on the month. The
boost from food price base effects is now past, but we
should increasingly begin to see pass-through from the
recent soft commodity price shock to food prices in the
coming months.
Core inflation, meanwhile, should remain flat for a second
consecutive month at 1.0%. Core inflation has recovered a
little since April’s 0.77% record low, with both core goods
and core services contributing to the rise. We see scope for
core goods inflation to rise a little further – in part, its
strength reflects pass-through of past euro weakness. But
core services should resume its downward trend given the
weak state of consumer demand and an absence of any
pressure from labour costs. Net, we expect core inflation to
trade flat in September.
Overall, the rise in food and energy will help drive a
rebound in headline inflation to 1.8% y/y, its highest level
since the end of 2008.
Market Economics 23 September 2010
Market Mover
59
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