In August, Italian business and consumer confidence and EMU economic sentiment and industrial confidence will probably have deteriorated. EMU consumer confidence and the Purchasing Managers’ Indices for the manufacturing sector in Germany and in the eurozone are not likely to be revised significantly.
The same applies to Q2 German GDP. The detailed breakdown of the expenditure components will show that changes in inventories and investment in machinery and equipment contributed positively to overall GDP growth. Private consumption, construction investment and net exports will probably have declined, with imports having increased more than exports. German retail sales are likely to have suffered a setback in July, after having rebounded in June. Moreover, German retailers’ business assessment and consumer confidence plummeted.
The preliminary results for national German CPI in August will be released on Monday. We expect German consumer prices to have declined by –0.1% mom, which would bring down the annual rate to 2.3%. Gasoline and heating oil will probably have dampened monthly inflation by a good 0.1 percentage points. Due to typical seasonal patterns, the prices of package tours and accommodation services are expected to have decreased. On the other hand, clothing prices will probably have gone up again. Food prices could have fallen again.
The Eurostat HICP flash estimate for August is expected to have decreased slightly to 2.4%. Monthon- month, prices will probably have increased by 0.1 %. In the coming months, annual inflation is expected to decline further.
German economic growth slowed to 0.1% qoq in Q2, but it had risen sharply by +1.3% qoq in Q1. The labour market recovery is thus likely to have continued at the end of summer, but the significant drop in the ifo business climate in August, due both to expectations and the current assessment, suggests that unemployment will not fall as sharply from now on. We expect adjusted unemployment to have gone down by 10k in August; adjusted unemployment would then remain at 7.0%. Unadjusted unemployment will probably have risen moderately from 2.939 to 2.950m, as is typical during the summer holiday season.
The harmonised EMU unemployment rate peaked at 10.2% in October 2010 and fell only slightly to 9.9%, where it has been since March. The decline in unemployment is still most pronounced in Germany, where the rate was a mere 6.1 % in July, while the Spanish rate, for example, actually edged higher to a new high of 21.0%. We expect the harmonised EMU unemployment rate to have remained unchanged at 9.9% in July.
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