Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.
Article / 25 March 2014 at 5:49 GMT

3 Numbers To Watch: French business, German Ifo, US house sales

editor/analyst /
United States

• French PMI increases to 31-month high for March
• Germany to suspend large defence contract with Russia
• First-time buyers vital to US home sales, says expert

A review of the mood in France’s business community starts the trading day in Europe with a release from the National Institute of Statistics and Economic Studies (Insee). We’ll also see a new report on business sentiment in Germany via the Ifo Institute for Economic Research and the latest on US home prices according to the S&P-Case Shiller numbers. Also, don't overlook today's updates on UK consumer price inflation (09.30 GMT) and US consumer confidence (14.00 GMT).

The outlook for France's economy is looking brighter, according to new data. Photo: Bunyos

France Manufacturing Business Climate Survey (07.45 GMT)

Is Europe’s second-largest economy finally in recovery mode? Another round of cautiously answering “yes” looks a bit more persuasive after reading yesterday’s flash release of the country's composite purchasing managers index (PMI), which increased to a 31-month high for March. It seems that the private sector within this ailing giant is “finally moving in the right direction,” said Markit’s chief economist Chris Williamson. Indeed, looking at some of the details in the report strengthens the case for thinking optimistically. For instance, the manufacturing and services components of the composite index both showed improvement; new orders picked up and employment was stable although convincing signs of growth in the labour market remain elusive.

Still, it’s fair to say that France’s macro profile suddenly looks brighter, if only in relative terms. The first question is: is the latest PMI news another misleading data point? It wouldn’t be the first time that encouraging numbers turned out to be a false dawn for the Eurozone’s long-running struggle to break free of stagnation or worse. But if this time is different, we should expect to see some corroborating support for Markit’s upbeat data, starting with today’s survey of French business executives in the manufacturing sector.

In the previous update, the business climate in manufacturing remained stable throughout February, hovering at its long- term average. The Markit data implies that today’s release from the economic statistics arm of the French government will also show some improvement in the March profile. The consensus view, however, is sceptical; economists are projecting a marginal decline to 99.5 from February’s 100.1. Even so, that’s effectively no change. But if there’s a hefty negative surprise, doubts about France’s recovery will look a bit less secure... again.

Source: Insee

Germany Ifo Business Survey (09.00 GMT)

The Russia-Ukraine crisis is starting to pinch Europe’s largest economy. Last week, the German government announced that it would suspend a large military contract with Russia. Although the deal for the defence division of Rheinmetall AG is relatively small (EUR 120 million), the decision is symbolic of what may lay ahead for Germany and the rest of Europe. “Given the current situation, the German government considers the construction of a military training facility in Russia to be inappropriate,” the economy ministry said.

The problem for Germany is that it has the most to lose within Europe in economic terms with sanctions imposed on Russia. Indeed, by one estimate, Germany accounts for more than 30 percent of European exports to Russia. Meantime, Germany has poured billions of euros in direct investment into its misbehaving neighbour to the east over the years.

One question linked to this new risk factor is how it’s affecting the outlook in the business community generally. For the moment, expectations remain positive. "The German economy will remain on its current course of growth and even gather speed," the head of the nation's banking federation BdB advised last week. Yesterday’s March release of the flash PMI data for the country offered a similarly encouraging outlook.

Today’s Ifo report will bring another perspective on the business community’s mood. Analysts are looking for a stable profile overall although the expectations component for March is projected to dip a bit for the second month in a row. If so, should we view this as an early sign of trouble for confidence in the face of heightened geopolitical risk in the east? Not necessarily, although a bigger-than-expected slide in today’s expectations index might be a game-changer for looking ahead.

Source: CESIfo Group Munich

US S&P Case-Shiller Home Price Index (13.00 GMT)

The housing data has been on the defensive lately, raising questions about the outlook for this critical piece of the economy. Last week’s February report on existing home sales, for instance, decreased for the sixth time in the past seven months. But there’s still a broad consensus that the weakness in real estate sales and construction is mostly due to a harsh winter. The spring, we're told, will bring more than just rain and flowers. This much is clear: we're in a pivotal year, one way or the other. An analyst at RealtyTrac, a real estate industry data firm, recently reminded that "2014 will be the year where we need to see the first-time home buyers step up to the plate in greater numbers."

It’s also clear that rate of price gains for housing has peaked. That alone isn't fatal for the sector’s prospects but it’s a sign that the real estate recovery is maturing. A slower rate of growth may actually boost the odds for a sustainable recovery. But this is still a delicate balancing act until we see stronger numbers overall. The combination of a lesser pace of price gains at a time when sales are falling still raises questions about what comes next. It may be a brief transition period until housing regains some traction in the warmer weather. Then again, outright price declines would cast a dark shadow.

The odds of red ink, however, look remote for today’s report, according to the crowd. The consensus forecast is anticipating a 0.7 percent rise (seasonally adjusted) for the monthly comparison and a 13.3 percent jump in the raw year-over-year data through January. That’s roughly what we are seeing in the previous month’s numbers that covered the trend through the end of 2013. But if today’s data comes in well below expectations, the slower-but-sustainable-recovery outlook for 2014 will face new questions.

Source: Standard & Poor's


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail