MitchSand's  Instablog

Italy : ISAE Manufacturing and mining survey

• The Istat manufacturing survey points to another gloomy period for the sector this month. At just 86.2, the May headline sentiment index was down nearly 3 points from a slightly weaker revised April outcome, well short of market expectations and, more significantly, at its lowest level since August 2009.

  Overall orders were off another 4 points at minus 43 within which the export component was just a point lower at minus 34. The domestic market dropped 3 points to minus 47, its worst reading since October 2009. Not surprisingly, output expectations continued to deteriorate, losing an additional 3 points to minus 8 and there was also a slight softening in the 3-month ahead outlook for producer prices (2 after 3).

  Today's findings suggest that the manufacturing PMI will post another comfortably sub-50 reading this month (43.8 in April). In turn this should help to keep Italy at the forefront of speculation about which country might follow any Greek exit from the single currency.

Japan : Unemployment Rate

• April unemployment rate edged up to 4.6 percent from 4.5 percent in March. The number of unemployed persons was 3.15 million, a declined of 140,000 from a year ago. April employment dropped 270,000 on the year 62.75 million. This was the fifth consecutive decline in employment.

Japan : Retail Sales

• April retail sales were up 5.8 percent from a year ago. This was the fifth consecutive increase in a row. March retail sales were up an unrevised 10.3 percent. Auto sales continued to jump - they were up 55.6 percent from a year ago after gaining 50.4 percent in March. Fuel sales were up 7.7 percent after increasing 6.1 percent the month before. However, retail machinery sales dropped 18.3 percent after losing 12.2 percent in March.

Great Britain : CBI Distributive Trades

• The CBI's latest survey of high street activity suggests that, following a heavily rain-affected dive in April, consumer spending rebounded well in May.

  At 21 percent, the balance of retailers reporting higher sales than a year ago was up some 27 percentage points from its level at the start of the quarter and well above both market expectations and the CBI's own forecast made just last month. Moreover, the recovery came before the start of the current period of unusually hot weather.

  However, in part the headline bounce will reflect the acute weakness of retail sales in May 2011 for when the official data show a 2 percent monthly decline. Still, the survey also found retailers confident about prospects for June with their forecast sales measure up a further 4 percentage points to 25 percent.

  Orders rose a tidy 14 percentage points to 7 percent, their first reading in positive territory so far this year and are seen climbing to 18 percent next month. Even so, sales for the time of year were just minus 19 percent after a zero report last time and inventories were sharply higher too.

  Overall a decidedly mixed report leaves a very unclear picture of retail sales last month. There are certainly some bright spots but near-term optimism is no doubt biased by the upcoming Jubilee celebrations. In addition, the BoE will not be impressed by indications provided by the more detailed quarterly survey that retailers have become more confident in their ability to raise prices.

Germany : CPI

• Consumer prices were provisionally a little softer than expected this month, falling 0.2 percent from April for an annual inflation rate of 1.9 percent, down a couple of ticks from last time. This was the first sub-2 percent reading since December 2010.

  The HICP moved largely in tandem, posting a slightly steeper 0.3 percent monthly decline that lowered its 12-month rate from 2.2 percent to 2.1 percent.

  Falling energy costs, particularly heating oil and motor fuel, helped to depress the headline CPI and without the effects of which overall consumer prices would probably have been little changed from mid-quarter. With food prices just slightly weaker, the core CPI was likely a notch stronger than the headline index on the month but its annual rate should still have been little changed if not a tick lower.

  Within the core, charges for clothing and shoes fell back after sizeable seasonal gains in March and April and package holidays were also notably cheaper. Outside of hotel services, there were no price hikes of any real significance.

  In the wake of the powerful IG Metall union's 4.3 percent wage deal agreed earlier this month, its largest pay rise in more than twenty years, the Bundesbank is on inflation alert. While apparently accepting that Germany may have to tolerate larger than normal price rises to accommodate economic recovery in the Eurozone, it remains clearly reluctant to see any protracted period of above target inflation. As such today's figures should be cautiously well received by the central bank.

United States : Consumer Confidence

• Retreating significantly this month is the Conference Board's consumer confidence index which is no longer testing recovery highs. The index fell nearly four points to 64.9 vs a downwardly revised 68.7 in April. This decline is in direct contrast to the consumer sentiment index which, in data released on Friday by Reuters/University of Michigan, broke out to new recovery highs.

  The strength behind the sentiment index is centered in the expectations component, which contrasts again with the consumer confidence report where expectations, at 77.6 vs April's 80.4, show the least optimism since January. The consumer confidence data also show a decline in the assessment of the present situation, where a steep fall to 45.9 vs 51.2 is another contrast with the consumer sentiment report. The decline in the present situation in today's report includes declines in the assessment of the jobs market which is not a good indication for the government's monthly employment report on Friday.

  Inflation expectations, at 5.6 percent vs 5.8 percent in April, are down but it isn't giving much of a lift to the Conference Board's sample. This report and the consumer sentiment report have been tracking very closely over the recovery which underscores how odd the dislocation is this month. Perhaps the two will come together during June, but for right now it's hard to judge the consumer's mood.

• Market Consensus before announcement
  The Conference Board's consumer confidence index in April slipped three tenths to a no better than soft 69.2. But there is good news led by a 3.2 percentage point decline to 37.5 percent in those who say jobs are hard to get right now. More also say business conditions are currently good while inflation expectations, reflecting the easing in gas prices, are down four tenths in the month to 5.8 percent. An offsetting factor was a 1.5 percentage point decline to 14.0 percent for those who see their income rising.

Australia : Retail Sales

• April retail sales dropped 0.2 percent after increasing 1.1 percent in March. Analysts had expected an increase of 0.2 percent. On the year, sales were up 2.4 percent. Household goods retailing was down 0.8 percent, other retailing was 0.7 percent lower, department stores slid 1.0 percent and clothing & footwear & personal accessory retailing edged down 0.1 percent. Sales in cafes, restaurants & takeaway food services were up 0.4 percent and food retailing was 0.1 percent higher.

European Union : M3 Money Supply

• Broad money once again undershot expectations in April. Annual growth of 2.5 percent was some 0.6 percentage points short of the downwardly revised March pace and left the 3-month average measure preferred by the ECB unchanged at a sluggish 2.7 percent.

  In fact the headline data would have been weaker still but for continued strength in lending to general government which, at a 7.7 percent 12-month rate, was up another 0.2 percentage points from its start of quarter rate. By contrast, lending to the private sector was up just 0.3 percent on the year after a 0.6 percent gain last time and within this loans to households slowed from 0.6 percent to 0.5 percent and for house purchase to 1.0 percent from 1.1 percent.

  Borrowing by non-financial corporations edged up 0.2 percentage points to a lowly 0.5 percent annual rate while lending to non-monetary financial intermediaries (excluding insurance corporations and pension funds) dropped from 2.3 percent to minus 1.5 percent.

  There is nothing here to undermine speculation that additional monetary easing from the ECB is just a matter of time and in any event there will be considerable interest in what Chief Draghi has to say at the central bank's meeting next week.

Great Britain : M4 Money Supply

• M4 showed some much needed strength in April, posting a 1.1 percent monthly rise that boosted annual growth of the broad money aggregate from minus 4.8 percent in March to minus 3.8 percent.

  However, the headline acceleration masked further weakness in the key private sector lending counterpart for which a minimal 0.1 percent monthly advance (the first gain of any size since August 2011) saw annual growth slump to minus 4.7 percent, a new series low.

  At least there was slightly better news on the Bank's preferred measure which excludes intermediate other financial corporations. Here a solid monthly 0.7 percent advance built on a respectable 0.6 percent increase in March although even then annualised 3-month growth slowed to 3.8 percent or 3.3 percentage points less than in the first quarter.

  Elsewhere in the financial data mortgage approvals rose 1.5 percent on the month in April but remain at historically low levels while gross mortgage lending expanded by the smallest amount since July last year.

(To Be Continued...)