Market Economics | Interest Rate Strategy - BNP PARIBAS ...

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Chart 8: French Hh Confidence (key items)
10
0
-10
-20
-30
-40
-50
-60
Future Finances - Personal
Past Finances - Personal
-70 Past Living Standard - National
Future Living Standard - National
-80
04 05 06 07 08 09 10
Source: Reuters EcoWin Pro
Diffusion Index, SA Jul (f) Jun May Jul 09
INSEE indices:
Overall -41 -39 -38 -37
Buying opportunity -27 -24 -24 -28
EU Commis. Index:
Headline -24.0 -22.0 -21.3 -28.1
BNP Paribas Forecast: Continued Decline
France: Household Confidence (July)
Release Date: Thursday 22 July
The economic news that usually drives household
confidence has been mixed over the past few weeks.
Unemployment data did not confirm in the past two months
(+1.4% in April and May) the improvement seen earlier in
the year. Conversely, inflation eased in June, especially
energy prices.
However, the main piece of news affecting household
confidence recently is the announcement of the pension
reform and the prospect of fiscal tightening, much needed
in order to reduce the deficit to 3.0% in 2013. This is
probably weighing on confidence, with the political
scandals that affected various government members also
likely to have taken their toll.
The perceived national standards of living, both past and
future, have deteriorated significantly since the start of the
year. The personal financial situation, which usually moves
in tandem with the standard of living, has held up better
(see chart). These low levels probably explain the decline
in the ability to save.
Key Point:
The prospect of fiscal tightening is probably the
major reason for the continued decline in household
confidence.
Chart 9: US Existing & Pending Home Sales
130
125
120
115
110
105
100
95
90
85
80
75
Existing Home Sales
(mn, RHS)
Pending Home Sales
(2001=100, 1m lag)
02 03 04 05 06 07 08 09 10
Source: Reuters EcoWin Pro
Jun (f) May Apr Mar
New Home Sales
(000s saar) 310 300 446 389
Existing Home Sales
(millions saar) 5.00 5.66 5.79 5.36
Key Point:
We expect existing home sales to decline by 12%
m/m in June as pending home sales plummeted in
May by 30%, while new home sales should remain
weak, at 310k annualised units.
7.2
6.7
6.2
5.7
5.2
4.7
4.2
BNP Paribas Forecast: Weak
US: Existing & New Home Sales (June)
Release Date: Thursday 22 and Monday 26 July
Existing home sales should drop sharply in June following
a smaller decline the previous month. In May, existing
home sales declined by 2.2% m/m and we expect they will
drop by 12% in June as pending home sales plummeted
30% in May. It appears that much of the stabilisation in
housing demand over the past year stemmed from a pulling
forward of demand through the tax credit. Indeed,
mortgage applications to purchase a home declined by
22% m/m in May, and by another 11.5% m/m in June, to
their lowest level since 1996, suggesting prospective
buyers are already pulling back sharply.
New home sales plummeted by 32.7% m/m in May, adding
to evidence that prospective home buyers withdrew from
the market en masse in May after the government
homebuyers’ tax credit expired in April. We expect new
home sales to remain weak at 310k annualised units, up
just 3.3% from their 30-year low. The end of the
government tax credit at the end of April should cool sales
in the summer months, with housing demand troughing in
June or July, before the cyclical upward trend resumes in
the second half of the year.
In line with that, the NAHB index of prospective buyers’
traffic dropped back to 14 in June after blipping to 16 the
previous month.
Market Economics 166 July 2010
Market Mover
61
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