Article / 28 May 2013 at 5:17 GMT

3 Numbers To Watch: FR Cons. Conf., US Home Prices & Cons. Conf.

editor/analyst /
United States

Tuesday’s update on consumer confidence in France will help guide expectations for Eurozone data releases this week. In the US, new numbers arrive on housing prices for March and consumer confidence for May.

France Consumer Confidence (06:45 GMT) Household spending in real terms jumped by an unusually robust 1.3 percent in March, suggesting that the recession in France could ease sooner than expected. But one month does not mean much, even if it is a comparatively strong month for growth. A second month of higher spending, however, would attract attention. What are the odds for seeing another encouraging report in Friday’s update on household spending for April in the Eurozone’s second-largest economy? Do not hold your breath: analysts warn that another decline is likely. Nonetheless, today’s release on consumer confidence may offer a clue for deciding if the recession in France is getting any worse or easing.

In the April report, confidence on France’s economic situation remained stable, sticking to 84 for the broad index for the second month in a row. That is still well below average (100 is the normalised mean for this series). But in this battered realm of Europe that is better than the alternative for such a large piece of Eurozone GDP. A subset benchmark that focuses on the outlook for major purchases for the year ahead was also stable in the April review. This much is clear: the stakes are high. Household consumption represented 58 percent of GDP for France in 2011, according to the World Bank, and so the recession is unlikely to end until retail spending is at least holding steady.


US S&P Case-Shiller 20-City Home Price Index (13:00 GMT) Residential real estate prices have been consistently trending higher for a year and another increase is widely expected in today’s update for March. In the previous release, prices rose 1.2 percent on the month, which translates into a 9.4 percent annual advance for the 20-city benchmark. That is a robust sign that the housing recovery rolls on. It is also a number that promotes the view that April’s tumble in new housing starts is not the beginning of the end for this sector’s recovery.

Nonetheless, there are still challenges to overcome. One of the headwinds for housing is the difficulty that consumers face in securing credit. “Strict lending standards, continued deleveraging and limits to mortgage equity withdrawal” are factors that are constraining the pace of growth, observes this month’s commentary from the investment firm Pimco. But as long as housing prices rise, the impediments to lending will recede. Nothing promotes lending and buying like a bull market. On that front, today’s update is likely to deliver more good news.


US Conference Board Consumer Confidence Index (14:00 GMT) Today’s release will be closely analysed for clues on the mood among consumers in the wake of wobbly retail sales data in the last two months. Consumer spending fell in March and rebounded weakly in April. The recent numbers fall short of clear signs of distress, but they are hardly reassuring. The market will be looking to today’s report from the Conference Board for additional perspective on whether the spring slowdown is noise or a warning sign for what lies ahead.

The relationship between the monthly change in real retail and consumer confidence is not perfect, but it is close enough so that today’s number will provide guidance on what to expect for the next retail sales release on June 13. There is a reasonable case for thinking that consumer sentiment will more or less remain steady if not rise a bit today, according to the consensus forecast. Another clue that supports optimism comes from the labour market, which continues to post modest growth. The fact that jobless claims slipped again last week - close to a five-year low - does not hurt either. But beware: The market is anticipating good news, which means that a big downside surprise in today’s confidence number will likely cast a dark shadow over market sentiment for the week ahead.



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