Market Mover - BNP PARIBAS - Investment Services India

Key Data Preview
Chart 7: US: The Future/Present Wedge Has
Peaked
Source: Reuters EcoWin Pro
Feb p (f) Jan H2 Jan p Jan Dec
Michigan
Sentiment 76.5 75.0 72.8 74.4 72.5
Key Point:
The University of Michigan Index of Consumer
Confidence should increase further in early January
and reach 76.0.
BNP Paribas Forecast: Increase
US: Michigan Consumer Sentiment (Feb, Preliminary)
Release Date: Friday 12 February
The final Michigan consumer sentiment index for January
increased to 74.4, 1.9 points higher than the final
December reading of 72.5. This is well above the trough
reached back in November 2008 and the index is at its
strongest since the beginning of recession in January 2008
(when it was at 78.4). The present situation measure has
begun to catch up with the future expectations index lately
and the wedge between present and future has been
trending down toward its long-run mean. This usually
happens when the expansion begins (see Chart).
Sentiment in the Conference Board survey was improving
on hopes for the future rather than on current conditions
until recently. In January, it rebounded to 25.0 from its 26-
year low of 20.2 reached back in December 2009. Oil
prices have reseeded slightly in recent weeks, implying
gasoline costs are likely to decrease in February. In
addition, strong GDP growth in Q4 should support
consumer optimism. Overall, we expect the University of
Michigan index to improve further in early February,
increasing by 2.1 points to 76.5.
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Chart 8: Japanese Real GDP (sa, % q/q)
Domestic Demand
(excluding Private inventory)
Private inventory
External
Demand
03 04 05 06 07 08 09
Source: Cabinet Office, BNP Paribas
Q4 09 (f) Q3 09 Q2 09 Q1 09
Real (% q/q) 0.9 0.3 0.7 -3.1
Real (% annualized) 3.8 1.3 2.7 -11.9
Real (% y/y) -1.2 -5.1 -5.8 -8.9
Key Point:
Led by brisk exports, coupled with a rebound in
domestic demand, Q4 2009 real GDP will likely show
robust annualised growth of 3.8%. Even so, it will be
a while yet before an autonomous growth
mechanism begins.
BNP Paribas Forecast: Robust Growth
Japan: GDP (Q4 2009)
Release Date: Monday 15 February
The preliminary (first) estimate of Q4 2009 GDP will likely
show that the growth accelerated from 0.3% q/q in Q3
(1.3% annualised) to 0.9% q/q (3.8% annualised). Growth
in Q4 will have been led by booming exports, while
domestic demand has also finally stopped contracting
thanks to the stabilisation of capital investment (this had
been weak for a long time). However, a large revision in
the second estimate cannot be ruled out, as occurred the
previous quarter (Q3 growth was marked down to an
annualised 1.3% from 4.8%, with revisions in capital
investment and inventories the key factors).
That said, the domestic economy remains fundamentally
weak as the positive cyclical feedback loop between
income and expenditure has yet to kick in. Meanwhile, the
impact of fiscal stimulus is expected to fade in coming
quarters and the economy will likely enter a soft patch in
the spring. With exports (especially to the rest of Asia)
likely to continue expanding solidly, we believe that the soft
patch will be mild. However, it will be a while yet before an
autonomous growth mechanism starts to function.
Market Economics 12 February 2010
Market Mover
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www.GlobalMarkets.bnpparibas.com