Wednesday, March 22, 2006

Italy: Consumer confidence down in March


Italy: Consumer confidence down in March

- Italian consumer confidence fell back in March, following its jump last month when it reached a 3-year peak.
- This fall was due to a deterioration in households’ assessment about the overall economic situation (current and future prospects) which was not offset by the improvement in the national economic climate index.
- All in all, fundamentals, amongst which the generous wage deals decided in the latest round, support the view of an acceleration in household consumption this year.

Italian consumer confidence fell back in March, following its jump last month when it reached a 3-year peak. The ISAE composite index lost 0.8 point at 109.2, remaining thus far above its cyclical lows.

This fall was due to a deterioration in households’ assessment about the overall economic situation (current and future prospects). This drop contrasts with growing optimism in Italy’s neighbour countries, France and Germany. Furthermore it was not offset by the improvement in the national economic climate index.

The national economic climate index was up by 0.9 point, at 94.3, its highest level since October 2004. Both assessments of the current situation and expectations improved. Expectations (almost constantly in negative territory since the beginning of the survey) increased the most, up from -21.0 to -13.0, reaching its highest level since June 2002. Nonetheless, a higher proportion of households expected an increase in unemployment in the next 12 months, despite the fact that unemployment rate had remained stable at a 10-year low in Q4 last year for three quarters in a row (7.7%), thanks to the registering of illegal workers and the addition of temporary and part-time jobs to the workforce.

Conversely, the personal economic climate index deteriorated, down from 118.0 to 115.9, as the approach of the general elections probably cast doubt on future economic developments in Italy. Nonetheless, households said they were more prone to buy durables (up from -99.0 to -94.0) as their sentiment about their current financial situation remained stable over March.

All in all, the March fall is probably a correction following the peak reached in February. Indeed, fundamentals, amongst which the generous wage deals decided in the latest round, support the view of an acceleration in household consumption this year.

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US: Rebound in industrial production in February, despite a pause in the manufacturing sector

Industrial production recovered by 0.7% m/m in February (after -0.3% m/m in the previous month). This rebound was exclusively due to the (partial) catching up in the utilities sector (+7.9% m/m). By contrast, output declined slightly in the mining sector and remained stable in the manufacturing sector.


- The rate of capacity utilisation bounced back to 81.2% from 80.8% in January.
- Recent surveys conducted in the manufacturing sector have remained very favourable.

Rebound in industrial production in February, despite a pause in the manufacturing sector
+0.7% m/m, thanks to the upward correction in the utilities sector.

Industrial production recovered by 0.7% m/m in February (after -0.3% m/m in the previous month). In both q/q (annualised) and year-on-year terms, healthy growth rates underline the current robustness of the industrial sector (+8.3% and +3.3% respectively).
This monthly rebound was exclusively due to the (partial) catching up in the utilities sector, following a huge temporary fall in January, resulting from exceptionally mild weather conditions (+7.9% after -11.5% m/m).

By contrast, output declined slightly in the mining sector (-0.5% m/m) and remained stable in the manufacturing sector (following four consecutive sharp increases).
The rate of capacity utilisation back on the way up (81.2%).

The rate of capacity utilisation bounced back to 81.2% from 80.8% in January. It thus came back to its December level. Within the manufacturing sector, it remained broadly unchanged (80.1% following 80.2%).
The upward trend in capacity utilisation in past months contributes, along with stronger labour market tensions (i.e. unemployment rate below 5%), to explain why the FOMC remains cautious with regard to inflationary pressures

Surveys point to strong activity ahead.
Recent surveys conducted in the manufacturing sector have remained very favourable. In particular, the February ISM survey and our March NEM index (which is derived from the New York and the Philadelphia Fed surveys) pointed to more dynamic output and new orders .