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Lea Jakobiak
On the eve of a keynote speech by the ECB President, Mario Draghi, one leading economist doesn't hold back in the way he believes the Bank has dealt with the eurozone's faltering recovery.
Article / 19 February 2013 at 5:28 GMT

3 Numbers to Watch: DE ZEW, CN Wholesale Trade, US NAHB HMI

James Picerno James Picerno
editor/analyst / CapitalSpectator.com
United States

The ZEW survey offers the first update on sentiment in Germany since last week’s disappointing fourth-quarter GDP report. Later in the day, wholesale trade numbers for Canada and the NAHB Housing Market Index for the US hit the streets.

Germany ZEW Survey (10:00 GMT) The stakes are high for today’s February update on the mood among financial analysts. The monthly release of the ZEW data provide one of the early clues for shaping opinion on the month ahead. After last week’s worse-than-expected readings on fourth-quarter GDP for Germany and Europe, the market will be keenly parsing today’s report for hints of what to expect.

Last month’s ZEW update was certainly encouraging, with the index of economic sentiment rising sharply to the highest level in nearly three years. Financial analysts at the time thought the economy had turned a corner and was set to expand in the months ahead. Does that view still hold? Thinking positively is a tougher sell after reading last week’s flash GDP report for Germany, which reported a 0.6 percent decline in economic activity in the final three months of 2012. That’s slightly worse than analysts expected. GDP, of course, is a backward-looking metric and ZEW is forward looking. All the more reason to pay close attention to today's number.

The question now is whether the earlier run of upbeat reports received in 2013 are still relevant for anticipating a better first quarter? The ZEW report will surely influence sentiment on this question. The good news is that analysts expect a moderate rise, and that’s also the outlook from my econometric modelling. Beware of any downside surprise, however, which will likely weigh heavily on market sentiment so soon after last week’s GDP news.

de.zew.19feb2013

Canada Wholesale Trade Sales (13:30 GMT) The Canadian dollar has been losing some ground against the US dollar in recent months and today’s December update on wholesale trade isn’t expected to offer a new incentive for reversing the trend. Analysts think that the two months of growth through to November for wholesale trade will take a breather and post a modest decline in last year’s final month.

Managing expectations down slightly looks reasonable after last week’s worse-than-expected 3.1 percent drop for Canada’s manufacturing sales in December, which reversed November’s 1.8 percent rise. Manufacturing and wholesale sales aren’t highly correlated on a month-to-month basis. But given the relatively sharp reversal of fortunes in manufacturing sales in December, the force of gravity weighs heavily on the outlook for today’s wholesale number.

cn.wholesale.19feb2013

US Housing Market Index (15:00 GMT) The revival of the housing market has been a key bright spot for the economy. Given the ongoing struggles to keep growth alive generally, this is one sector that can’t afford to stumble. All the more so after the surprisingly weak fourth-quarter GDP report for the US. The slight contraction in the economy in last year’s final three months may be temporary, led by an unusually steep drop in defense spending. But if there’s any hope that the private sector can continue to smooth over the rough edges in this year’s Q1 and beyond, we’ll need to see more progress on the housing front.

Enter today’s monthly update on sentiment among homebuilders. Last month’s release showed that builder confidence was unchanged in January, albeit at a relatively elevated level compared with the last several years. The NAHB Housing Market Index has been a valuable leading measure of overall activity in this critical sector and so today’s report will be closely reviewed for any signs of weakness. The consensus forecast sees the index inching higher for February, which will likely cheer the market. If the forecast proves overly optimistic, however, the news will cast doubts on Wednesday’s release for January housing starts data from the government.

us.nahb.19feb2013

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