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Article / 10 June 2013 at 4:52 GMT

3 Numbers to Watch: French production, EU confidence, US ETI

James Picerno James Picerno
editor/analyst /
United States

European Central Bank President Mario Draghi last week repeated his forecast that economic activity for the Eurozone "should stabilise and recover in the course of the year, albeit at a subdued pace." The market will be looking for signs of support in today’s economic news, including the April update on industrial production for France and the latest reading on the Sentix Investor Confidence Index for Europe. Later, the Conference Board updates its US Employment Trend Index, which offers a broader read on the labour market's trend.

France Industrial Production (06:45 GMT); Industrial output contracted in March and today’s update may provide similarly discouraging news, or so it seems based on the latest survey of business executives in this sector. Industry confidence slipped to 88 in April from 91 in the previous month, according to Insee. The good news is that confidence turned higher in May, which implies a better reading for industrial activity next month. The Markit purchasing managers index for May also points to a slower rate of decline for manufacturing in France.

The market will be eager to learn if the relatively upbeat news for last month has any early traction in today’s April read on industrial activity. The French economy generally is still a long way from growth, of course, particularly in manufacturing. But the rate of contraction seems to be slowing. Is that enough to support Mario Draghi’s efforts at talking up the possibility of a better second half for the Eurozone? Maybe, and so even a small ray of improvement in today’s industrial production number might change the outlook, if only slightly.   


Eurozone Sentix Investor Confidence (08:30 GMT): The mood among investors on the macro outlook for Europe improved in May for the first time since February, according to this Sentix index. That small bit of progress is also reflected in other sentiment indicators. Last week, for instance, Markit Economics reported that “the downturn in the Eurozone economy eased for the second month running in May. Rates of decline eased for both manufacturing production and service sector business activity.” There was also a slight improvement in last month’s reading of the European Commission’s economic sentiment indicator.

Today’s Sentix update offers an early look at how the next round of confidence benchmarks will fare for this month. Although outright optimism is still in the minority, another modest bit of improvement would help buoy ECB President Mario Draghi’s forecast of better days in this year’s second half. This Sentix index is still deep in negative territory, which indicates that pessimism dominates among investors looking ahead for Europe. But analysts think we could see another rise, which would strengthen the case for anticipating similar moves later in the month from comparable metrics. By contrast, a decline here would suggest that Draghi's expectations for better numbers may be premature.


US Conference Board Employment Trend Index (14:00 GMT): The government’s upbeat payrolls report for May cheered the markets on Friday for several reasons. The gain was a bit higher than the consensus forecast and it was also a slight improvement over April’s increase. But the improved jobs report for last month wasn’t so strong as to inspire worries that the Federal Reserve will taper its program of bond purchases in the immediate future, a concern that sparked a wave of selling in fixed-income markets around the world in recent weeks.

The change in sentiment late last week represents a sharp improvement over previous concerns that the US economy was faltering. Is the improvement in the mood warranted? The May payrolls report suggests as much. As a reality check, today's ETI release from the Conference Board will bring a deeper perspective on the broad trend for evaluating the health of the jobs market. This benchmark, comprised of eight facets of the labour market, has been posting slow but steady improvement in recent months, which suggests that the outlook on this critical macro front remains encouraging. Today’s number is likely to reconfirm that view, leaving plenty of room for anticipating that the next batch of US economic reports will support the outlook for modest growth.



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