EMU Economic Indicators Preview

(Week of 24 to 30 March 2008)

• CPI inflation in Germany is likely to have accelerated to 3.0 % yoy in March
• Both the March German ifo business climate and the April GfK German consumer confidence are expected to have deteriorated
• German retail sales probably have increased again in February

In March, the German ifo business climate index might have suffered a setback, after having improved unexpectedly in February. The German ZEW economic sentiment has recovered, but the US ISM manufacturing index and the German yield spread have both deteriorated, with short-term interest rates having increased and long-term interest rates having decreased recently. Both the crude oil price and the euro have continued to go up and the DAX performance index has weakened further.

For similar reasons, we are expecting the French business and consumer confidence in March and the GfK German consumer confidence in April to have deteriorated, while Belgian and Italian business confidence might have remained more or less unchanged.

German retail sales are expected to have increased in February, because retailers' business assessment had soared. However, consumer confidence had deteriorated. EMU industrial new orders are expected to have rebounded in January, after having plummeted in December. The corresponding German figure has dropped in January, but Italian industrial orders have recovered. However, the EMU current account is likely to have deteriorated in January, following its usual seasonal pattern and the trade balance. Q4 French GDP growth might be revised upwards to 0.4% qoq.

On Thursday, the first German Länder are expected to publish state CPI data for March. Subsequently, the preliminary results for national German CPI in March will be released, probably on Friday. We expect German inflation to have increased by 0.4% mom and 3.0% yoy. On the one hand, the rise in monthly inflation will have been due to seasonal factors, as prices for package tours and accommodation services surged because of the Easter holidays. On the other hand, energy prices likely had a strong positive impact of up to 0.2 percentage points as a result of record high crude oil prices.

BHF-BANK
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