GERMAN DATA: Retail Sales Carry Little Signal For Q2 GDP Contribution
German retail sales printed stronger then consensus in June, at 1.0% M/M (0.5% cons; -0.6% prior, note that that was revised from -1.6%, underpinning the strength seen in June). Nonetheless, this means that on a 3m/3m comparison, retail sales printed a mere +0.3% in Q2, which is likely not enough to carry any strong signal for a Q2 GDP consumer spending contribution. German headline Q2 GDP is to be released today at 09:00 BST / 10:00 local time (consensus is for -0.1% Q/Q following the comparatively strong 0.4% in Q1).
- From a sentiment perspective, the consumer sector in Germany appears to be lacking in momentum vs the supply side of the economy. GfK consumer sentiment continued to print in clearly negative territory as the fiscal measures of the government appear to be filtering through to business optimism but not consumers properly.
- The public mood remains negative despite recent rises in net wages, while small companies remain in crisis mode after two very bad years, German economist Achim Wambach said in a recent MNI exclusive. “Even those consumers who are relatively happy with their own circumstances think the economy is in trouble. If next year we see some more growth then the positive moods will also come back to consumption.”
- Despite the negative sentiment, on a Y/Y comparison, the retail sales series is posting solid gains at +4.9% (even if last June was particularly weak, underpinning that figure; compares to May's 2.6% Y/Y).
- Non-food sales drove today's release, at +1.8% M/M. Internet and mail sales were up in particular, at +9.0%. Food sales printed 0.3% m/m, meanwhile.
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STIR: J.P.Morgan Recommend Buying SFRU5 95.875 Puts Vs. ERU5 98.125 Puts
Late on Friday J.P.Morgan recommended buying SFRU5 95.875 puts vs. ERU5 98.125 puts, given their view on risks surrounding ECB and Fed pricing, while they are also wary of upside surprises in this week’s U.S. labour market data.
CROSS ASSET: MONTH END EXTENSIONS
Bond extensions are small for this Month.
Bloomberg Bonds:
- US Tsys: +0.07yr (small).
- EU Govies: +0.06yr (small).
- UK Govies: -0.04yr (non event).
MS Bonds:
- US Tsys: +0.04yr (small).
- EU Govies: +0.05yr (small).
- UK Govies: -0.03yr (non event).
Barclays FX:
- They see moderate USD selling vs most Majors, weaker against the EUR.
CITI FX:
- They see moderate USD selling, but weaker signal vs the GBP.
BofA FX:
- They see rebalancing flows into the USD and GBP.
EUROPEAN INFLATION: HICP Consensus Continues To Centre At 2.3% Y/Y For Core HICP
Following Friday's national-level data from France and Spain, further analysts commented on the Eurozone HICP data to be released Tuesday, while others updated their previous forecasts. Consensus appears to continue to centre at 2.0% Y/Y for headline HICP (May 1.9%) and 2.3% for core (May 2.3%). For our full preview of the release (released ahead of any of the national prints) see our full PDF report here.
- Bank of America: "We expect June HICP inflation at 2.2% in Germany, 1.9% in Italy (Mon), and 2.0% in the Euro area with core at 2.2%"
- CBA: "We expect headline inflation to remain close to the ECB’s 2% target in June. The core CPI may ease from 2.3%/yr in May. The ECB expect inflation to stabilise near 2%. However, we expect the Eurozone economy to be weaker than the ECB forecast, which will put further downward pressure on inflation. As a result, we expect two more 25bp cuts from the ECB by year end."
- Daiwa: "Headline HICP to undershoot the ECB's inflation target - moving sideways at 1.9%Y/Y for a second month - with core inflation easing a further 0.1pts to 2.2%Y/Y [...] The risks to that forecast might be slightly to the upside"
- JP Morgan: "We expect Euro area headline and core inflation to increase to 2.0%oya and 2.4%oya"
- TD Securities: "We expect inflation in Germany and euro area to move largely sideways in Jun. Continuing deflation in energy prices is likely to be balanced by upward pressures in food, bringing the headline measure up a tick. We expect service inflation dynamics to return to normal after Apr/May Easter distortions, keeping euro area core inflation at 2.3% y/y"
- UniCredit: "We expect headline inflation to have risen by 0.2pp, to 2.1% yoy in June, while core inflation will have likely increased by 0.1pp, to 2.4%, following high volatility triggered by the late timing of Easter. The underlying trend in core prices remains downwards, although we expect limited progress to be made over the remainder of the year. Energy prices will probably add 0.1pp to the June headline inflation rate, as geopolitical tensions in the Middle East have been putting upward pressure on the prices of oil products. We expect headline inflation, barring major shocks, to hover around the ECB’s 2% price goal for the foreseeable future."
