Article / 20 April 2012 at 4:29 GMT

3 numbers to watch: IFO, UK Retail Sales, Canada Leading Ind.

Head of Macro Strategy / Saxo Bank

Having digested yesterday's mixed Spanish and French bond auctions, we can turn our attention to today and a key German indicator, namely the IFO. Also on tap are Retail Sales from the UK and Leading Indicators from Canada, not to mention the G20 summit, which will see finance ministers and central bankers meet in Washington for a two-day stint with focus to be on ways to "address economic and financial challenges from the perspective of their impact on global welfare", or to put it more briefly whether more funding should be allocated to the IMF. So far IMF chief Lagarde has managed to secure pledges totalling $320 billion in new funding. They meet at 13:00 GMT.

  • Apr. German IFO (08:00) to show unchanged rate of growth? The IFO survey, which is based on 7,000 responses from companies in manufacturing, retailing, wholesaling, and construction, has made a comeback this year after finding a bottom in October at 106.5 and stood at 109.8 last month. For April, consensus looks for a more or less unchanged report at 109.5 suggesting that the German economy continues to withstand all the tailwinds currently coming at it. Having said that, the components signal that it will not be a smooth ride as the forward-looking Expectations Index (102.7) is well below the coincident Current Assessment Index (117.4). The IFO survey typically turns 1-to-2 quarters before GDP and last bottomed in 4Q'11 while GDP is projected to slid to 0.35% y/y by 3Q'12 from 2% in 4Q'12 (the 1Q'12 German GDP report is scheduled for 15 March).

German IFO vs. GDP

  • Mar. UK Retail Sales (08:30) to accelerate after a poor showing in Feb.: The UK economy continues to struggle with weak domestic demand as the fiscal squeeze is felt by consumers. Retail Sales, while up 1% y/y (and expected to accelerate to 1.5% in today's report), are declining on a year-on-year basis when you adjust for inflation, which is stubbornly high in the case of the UK at 3.5% though trending lower. Consensus looks for increases of 0.4% and 0.5% m/m, respectively, in March depending on whether you exclude or include gasoline prices after declines of 0.8% a month earlier.

UK Retail Sales vs. Household Consumption

  • Mar. Canadian Leading Indicators (12:30) to show continued growth: North America has so far proved quite resilient to the storms in Europe with growth of 1.6% and 1.7% y/y in the US and Canada, respectively; both of which looks like a trough has been reached (US) or is close by (CA). In the case of the latter it is also quite dependent on what happens in the economy of the neighbour to the South, and the improving conditions there are also likely to give a boost to the Canadian economy. Consensus projects a 0.5% m/m increase in the Leading Indicators Index, which would take the annual growth rate to 5.1% from 5.2% previously. Note: Canadian CPI will alo be released at this time, with expectations for robust monthly increases in the headline (+0.5%) and core CPI (+0.3%).

Canadian GDP vs. Leading Indicators


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