Friday January 11, 2013 - 18:48:20 GMT
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Reuters - www.reuters.com
ECONOMIC DATA ANALYSIS - EARLY SIGNS OF A FIRMER GLOBAL TONE?
ECONOMIC DATA ANALYSIS FRIDAY 11 JANUARY 2013
EARLY SIGNS OF A FIRMER GLOBAL TONE?
• Supportive US economic releases and the corporate earnings season could boost sentiment
• China looks set to post solid quarterly growth rate for Q4, underpinning 2013 hopes
• UK to benefit from stronger global activity, but wary of commodity price developments
Positive sentiment ahead of US earnings...Financial markets remained upbeat and US equities eked out further gains this week. The coming week could justify these moves, with the start of the US earnings season in earnest and a rich calendar of economic releases, which look set to be supportive. Separately Chinese releases should underpin optimism in global activity. This backdrop should also provide a lift for European economies although the focus this week is on the soft end to 2012.
US data to endorse more upbeat take ... Out of a slew of economic releases, including another expected rise in retail sales in December and continued positive housing market reports, we will be most interested in January’s Empire State and Philadelphia Fed business surveys and Michigan consumer sentiment. These should benefit from a post-Hurricane Sandy lift, the easing in gasoline prices and may also see some boost from the first fiscal cliff deal, notwithstanding lingering debt ceiling concerns.admittedly, it is less clear how small businesses will respond to the ongoing uncertainty, but gains in surveys would support growth expectations for Q1 GDP, despite the fiscal tightening. Although growth is likely to be sub-trend in H1 2013, it could approach annualised rates of 3% in H2. Overall, our global team forecasts growth of 2.1% for 2013, from 2.3% expected in 2012. While some may question Fed policy over 2013 in the light of December’s minutes, Fed Chairman Bernanke’s speech on Monday may add clarification and will be particularly interesting for an initial reaction to the fiscal progress to date
China GDP to underpin firmer global outlook ...China looks set to add to hopes for economic acceleration this year. We expect Q4 GDP to post a 2.4% rise on the quarter - towards the top of the range seen since the stimulus-induced growth after the financial crisis. This should be largely driven by domestic demand and we expect industrial activity and retail sales to post acceleration in December. Our global team forecast China to expand by 8.1% in 2013, up from an expected 7.8% in 2012, with faster expansion in H1.
Firmer world growth a mixed blessing for UK? ...A firmer global environment would boost the UK’s export outlook and ongoing efforts to rebalance the economy. However, stronger global growth could also add headwinds. Already, signs of accelerating activity are pushing some commodities prices higher. We do not expect this to impact the coming week’s producer input prices and base effects over the next two months should drive annual rates to 3½ year lows. But a reversal in those base effects thereafter could add to pipeline inflation. Consumer price inflation is off its recent lows and we forecast a rise to 2.8% in December, before pushing higher in H1 2013 as food prices fully reflect last summer’s poor harvests. We forecast CPI rising slightly above 3% by mid-year. With the surprising decision to leave the RPI methodology unchanged, this measure could peak at around 3¾%. Faster price growth could crimp real income growth again, depressing consumer spending. With the coming week’s retail sales release rounding off an “underwhelming” year, any additional drag would be unwelcome.
Euro area to post signs of weak end to 2012 ... The Euro area should also benefit from firmer global activity lifting production, particularly in Germany. But the coming week is likely to underline the weak end to 2012. We forecast German annual GDP growth of 0.9%, implying a drop in Q4 GDP. This will likely be the case across the wider euro area, particularly with industrial output expected to fall in Q4
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