European Mid Morning Update 23rd April 2008
Energy and food prices continue to strangle consumer spending power
Releases from Europe:
March Forecast Actual
French Consumer Spending (MoM) - 0.3% - 1.7%
French Consumer Spending (MoM) +2.8% +1.2%
April
French Manufacturing PMI (P) 51.6 51.5
French Services PMI (P) 56.8 54.0
German Manufacturing PMI (P) 54.8 53.6
German Services PMI (P) 51.5 54.6
More evidence of a consumer squeeze as French consumer spending crashed by a rather alarming -1.7% in February. Consumers appear to be delaying replacement of their cars which were down -9.1% over the month. Given that the figure will include spending on fuel and food, both of which continue to defy Noyer’s disbelief, the actual spending on other goods will be a larger negative number…
Manufacturing PMI’s took a tumble also, possibly another reflection of reduced consumer demand… Certainly given the strength especially of the German industrial production numbers the figure here was a bit of a damp squid.
The following economic releases are due today:
February
Italian Retail Sales (MoM) - 0.1%
Italian Retail Sales (YoY) +0.6%
Euro-zone Industrial New Orders (MoM) - 0.4%
Euro-zone Industrial New Orders (YoY) +5.7%
April
Euro-zone Manufacturing PMI (P) 51.6
Euro-zone Services PMI (P) 51.4
Euro-zone Composite PMI (P) 51.5
The Bank of England minutes are due to be released
Australian inflation rises further. Of course, no prizes in guessing that energy prices fueled the rise. Automotive fuel was up by a hefty 5.4% and even more in pharmaceuticals – a massive 13.1% gain.
It brought the headline RBA measurements a +4.1% YoY rise in the trimmed mean and a +4.4% rise in the weighted mean. This is well above the RBA’s 3% upper band.
It boosted the Aussie Dollar to the next resistance point, and a 24 year high at 0.9515 as traders anticipate higher interest rates again.
However, with the recently acquired wisdom that lower interest rates are unlikely to bring any real benefit to the economy equally the argument for higher interest rates appears equally valid. If there is nothing central banks can do to stop inflation, then why push up interest rates and squeeze more life from the consumer and business?
Japan saw a similarly poor number in their trade surplus, now down 30% over the past 12 months. Of course, no prizes in guessing that energy prices fueled the rise in imports. Overall imports have risen by 11.1% YoY while export growth has dipped to +2.3% YoY as U.S. demand fell again for the 7th consecutive month.
France sees its consumer slashing their spending habits with car purchases taking a particularly heavy hit.
Higher energy and food prices are sucking the life blood of just about all industrialized economies. Spending is being diverted to pay for transport costs and food. An ever decreasing amount is left over to pay for real economy products.
Yesterday light sweet crude reached a high of $119.90.
However much central banks lower rates there seems little they can do to get a bang out of their bucks…
This is a global phenomenon and not restricted to the U.S. but it is the Dollar that takes the beating. The conditions are right for a reversal in the downtrend but there is little interest in bucking the trend.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 103.92-05 1.6110-56 1.0161-07 2.0047-69
Res: 103.27-59 1.6042-71 1.0065-82 1.9940-97
Spt: 102.32-66 1.5932-45 0.9966-96 1.9804-41
Spt: 101.50-77 1.5840-86 0.9846-70 1.9716-44
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