Consumer Pessimism is Back in March

Consumer confidence is an important barometer of coming consumer expenditures and, hence, of the economic outlook. In March, the increase in gas and food prices brought back consumer pessimism, notably as to their expectations about the short term evolution of the economy.

In the United States, the Conference Board index, published yesterday, and the Thomson Reuters/University of Michigan index, released last Friday, signal that consumers are significantly less confident in March than in February. In Canada, the equivalent index from the Conference Board of Canada, published yesterday, is also weaker in March than the preceding month.

In Europe, consumer confidence is slightly lower this month compared to February, according to data published by the European Commission. In the euro area, it stays close to the long term historical trend, while in the European Union as a whole, it slips slightly below the historical trend.

Economic Prospects Remain Good for the Euro Area

Leading indicators on the evolution of the euro area economy let believe that growth will continue at a stable and moderate pace in the coming months. The Conference Board published yesterday its monthly leading economic index for the euro zone. The most recent data are the ones for February
( for details : http://www.conference-board.org/data/bcicountry.cfm?cid=10 ).

But the outlook has many pitfalls. Consumer confidence is down in March, and it will be possible to compare it with the sentiment of other economic actors when the European Commission publishes tomorrow its Economic Sentiment Indicator  ( http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm ). Inflation is relatively high, but the challenge is how to achieve lower inflation without impairing economic growth. The refinancing of the public debt in many countries is still a major issue. The unemployment rate remains high in the zone. The outlook is quite unequal from one country to an other.

Recent Conference Board and OECD leading economic indices

Since my last comment on March 14 on the OECD leading composite indices, the Conference Board (CB) published new data on some countries leading economic indices. See here how the two set of indices  compare, the most recent data of the indices being based on last January.

China : the OECD and CB indices point towards a moderate slowdown in the pace of growth.
Spain : both indices let anticipate a slow pace of growth.
United Kingdom : the OECD index signals a stable pace of growth, and the CB index allows to qualify it as being from modest to moderate.
France : regained growth momentum according to both indices.
Germany : continuation of the expansion according to the OECD and slowdown in the pace of growth based on the CB.

The CB published also its index of leading indicators for the United States for which the most recent data are the ones of February, and the index points to a sustained economic expansion in the coming months. The OECD January index also signals that the expansion will continue in that country.

Obviously, those indices do not take into account the consequences on the world economy of the recent catastrophes in Japan.

Details at : http://www.oecd.org/department/0,3355,en_2649_34349_1_1_1_1_1,00.html

                http://www.conference-board.org/data/bci.cfm

Canadian Economy : the Outlook Keeps Improving

Statistics Canada leading indicator index increased significantly in February (0.8%) according to data published this morning. Only one of the ten components of the index registered a decline. The main interrogation for the canadian economy prospects in the short term is to what extent its production will be affected by the consequences on the world chain of production of the lack of pieces and components that are normally produced in Japan. The operators in the stock market seems less preoccupied by that, the S&P TSX having recuperated in the last few days the losses that came in the aftermath of the catastrophes in Japan. 

The economic expansion will continue, based on OECD leading indicators

The OECD published this morning its economic leading indicator indices. They point again towards a sustained economic expansion in its member countries. But, the most recent data are the ones available for last January, so they don't take into account the consequences of the significant increase in the price of oil on the pace of economic growth. The IMF estimates that a $10 increase of crude oil diminishes world economic growth prospects by 0.2 to 0.3 percentage point in one year. Recent catastrophes in Japan will also affect the economic outlook of that country and of its economic partners. Remember that Japan represents close to 9% of world GDP and it is the third largest economy in the world.

Details at : http://www.oecd.org/document/18/0,3746,en_2649_34349_47332626_1_1_1_1,00.html

Return to Economic Growth in Japan

Indexes of leading indicators from the japanese government and the Conference Board (CB) point towards an improvement of the economic conditions in Japan. The Cabinet Office index increased in January for a third month in a row according to data published on March 7. As to the CB index, released March 8, it jumped 1.3% in January, after a slight increase in December, allowing the semestrial evolution of the index to turn to positive territory, after many months in the negative.

The leading indicators let presage a return to growth in Japan after a decline in economic activity during the fourth quarter of 2010. Forecasts for the japanese economy were revised slightly upward recently, the average GDP growth estimate for 2011 passing from 1.5% in early February to 1.7% in early March according to The Economist. Deflation remains a serious problem in Japan, and it continues to affect downward the economic outlook.

Good growth prospects for Quebec

The outlook continues to improve for Quebec's economy. The Desjardins leading economic index increased in January for a fourth month in a row. Signs of economic weakness were particularly present last summer. There was a return to growth in November, with a GDP increase of 0.5% according to the Institut de la statistique du Québec. The evolution of the leading index from October to January lets believe that economic growth will continue in the coming months.

Details at : http://www.desjardins.com/en/a_propos/etudes_economiques/conjoncture_quebec/indice_precurseur/ipd1103a.pdf

Better prospects for the world economy

New orders kept coming in at a faster rate of expansion in the world in February. The outlook for the manufacturing production in the coming months appears very good. "New orders rise at the quickest pace in almost seven years" according to the press release from Markit Economics on the JP Morgan Global Manufacturing PMI.

March 3 update : New business continued also to increase in the service sector. They increased significantly in the United States, the euro zone and India. Surveys realised in February with the purchasing managers show that the world economy should continue to expand in the coming months.

Details at : http://www.markiteconomics.com/