3 Numbers: German business climate, US store sales, US house prices
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• German confidence a key matrix amid lowflation threat
• US retail demand seen improving
• US house prices expected to creep lower
An update on sentiment in Europe’s biggest economy will set the tone for trading on Tuesday with the June release of the Ifo Business Climate data, which has been softening lately. We’ll also see the weekly release of chain store sales for the US – numbers that should shed light on the outlook for retail spending this summer. For the moment, the trend looks encouraging. Later, an update is scheduled on US house prices with the monthly report on the Case-Shiller House Price Index.
Germany: Ifo Business Climate Index (08:00 GMT):
Confidence in Europe’s largest economy is at its lowest level since late-2012, according to the June survey data from the Centre for European Economic Research/ZEW. “The German economy is currently in very good shape but further increases are becoming more difficult,” the group reported last week. “We had a strong first quarter in 2014 due to favourable weather conditions but signs are that the second quarter will be weaker.”
There’s still enough upbeat data overall to project that Germany’s macro trend will remain comfortably positive for the near term. The latest EY Eurozone forecast, for instance, sees GDP rising 2.0 percent in Germany, slowing to 1.5 percent next year. But the group added that “the threat of deflation is mounting” for the Eurozone. The European Central Bank may be prepared to nip the threat in the bud but the potential for trouble is still lurking. “Deflation, or even a period of very low inflation, would add to the problems of sluggish growth by raising real levels of debt and by delaying spending and investment decisions,” EY reminded us.
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