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July 2013

Spanish Q2 GDP Supports the Scenario of an Eurozone Recovery

The Spanish economy is finally about to return to growth, with official estimates showing that GDP fell by only 0.1% in Q2 2013 – the slowest rate of decline in almost two years. These data were in line with my central estimate and supports the scenario of an Eurozone recovery in Q3 (two positive quarters).


I’m now waiting for French and German figures but if they are in line with national central banks’ estimates, Eurozone GDP could reach at least 0.1% in Q2.


By taking into account the weight of each economy in the euro area (Germany: 27%; France: 21% and Spain: 12%), we can adjust our forecasts:



Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.3% 0.4% 0.5%
France 0.1% 0.2% 0.3%
Spain (1st publication) -0.1% -0.1% -0.1%
Others -0.2% -0.1% 0.0%




Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.081% 0.108% 0.135%
France 0.021% 0.042% 0.063%
Spain (1st publication) -0.012% -0.012% -0.012%
Others -0.080% -0.040% 0.000%
Total 0.010% 0.098% 0.0186%
Total (rounded) 0.0% 0.1% 0.2%


The publication does not change the final results (rounded) of each scenario but reduces the uncertainty concerning a potential deviation from my central estimate. As a consequence, tomorrow, Mario Draghi should underline that even if uncertainty remains, economic prospects are improving.

ECB Could Introduce Minutes Like FED and BOE

From Reuters:


The European Central Bank (ECB) could soon publish the minutes of its Governing Council meetings, which until now have been kept secret, two of the central bank’s executive board members said, according to a German newspaper.
ECB President Mario Draghi gives a press conference after decisions on interest rates are made but the euro zone’s central bank could soon follow the example of the Federal Reserve and the Bank of England in publishing minutes from the meetings, two ECB policymakers said in an interview with Germany’s Sueddeutsche Zeitung.
“The minutes should include who voted for what and why,” ECB policymaker Joerg Asmussen was quoted as saying in an advance copy of an article to appear in Sueddeutsche Zeitung on Monday.
Fellow ECB Executive Board member Benoit Coeure told the newspaper transparency was “important for the effectiveness of monetary policy and for trust in the central bank,” adding that society called for this transparency and the ECB was the only big central bank in the world that still kept its minutes secret.
The German newspaper said publishing the minutes would be controversial because it could result in lobby groups and politicians putting more pressure on individual policymakers.
According to the newspaper, Asmussen and Coeure called for more transparency when the ECB takes over the role of supervisor for the euro zone’s 130 biggest banks.

July Auto Sales Should Be Slightly Below June’s Level

Automakers will release July vehicle sales next Wednesday (August 2) and currently, analysts estimate July sales to be slightly below previous month level (15.89 million seasonally adjusted and annualized).


Here are some forecasts from specialists:


1/Edmunds: Retail Market Drives Strongest July Car Sales Since 2006, Says, the premier resource for car shopping and automotive information, forecasts that 1,328,397 new cars and trucks will be sold in the U.S. in July for an estimated Seasonally Adjusted Annual Rate (SAAR) of 15.8 million. The projected sales will be a 5.3 percent decrease from June 2013, but a 15.2 percent increase from July 2012. anticipates that this month will be the biggest July performance since 2006 when automakers sold 1,489,359 vehicles.
“Overall sales are undoubtedly strong, but what makes July truly impressive is that fleet sales are so low,” says Senior Analyst Jessica Caldwell. “That means retail sales are stepping up as the driving force for the auto industry. When people jump back into the market, it’s great news not just for the automotive sector, but for the entire U.S. economy.”


2/TrueCar: July 2013 New Car Sales Expected to Be Up 15.3 Percent According to TrueCar; July 2013 SAAR at 15.8M, Highest July SAAR since 2006


For July 2013, new light vehicle sales in the U.S. (including fleet) is expected to be 1,326,035 units, up 15.3 percent from July 2012 and down 5.1% percent from June 2013 (on an unadjusted basis).
The July 2013 forecast translates into a Seasonally Adjusted Annualized Rate (“SAAR”) of 15.8 million new car sales, up from 15.9 million in June 2013 and up from 14.1 million in July 2012.
“Value conscious buyers are devouring the compact segment inventories while the recovering housing sector is fueling the small business purchases of large trucks,” said Jesse Toprak, senior analyst for
“July delivered the highest year-over-year increase so far in 2013,” said Toprak. “Consumer demand for new vehicles remained healthy, with small cars/SUVs and large trucks outperforming the industry sales rate.


3/ JD Power: July New-Vehicle Retail Sales — Let the Good Times Roll

Total light-vehicle sales in July 2013 are expected to grow to 1,336,700, an 11 percent increase from July 2012. Fleet sales, which typically average between 15 and 16 percent of total sales in July, are expected to fall within the lower end of the average, with volume projected at 209,600 units.
“The overall trend in vehicle demand has outshined economic growth, and looking forward, the improving economic fundamentals should hold demand at the current level, if not accelerate it over the next several months,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “With a strong tailwind, it is not unreasonable to think about a 16-million-unit level of demand in 2013.”


4/ Wards: Fleet Orders, Low Stocks Temper July U.S. Sales Forecast

Diminished inventories and a decline in fleet orders likely will keep U.S. auto makers from equaling last month’s 67-month-high light-vehicle seasonally adjusted annual sales rate, according to a new WardsAuto forecast.
The data report calls for 1.31 million LV deliveries in July, equivalent to a 52,401-unit daily selling rate over 25 selling days. That’s a 9.4% improvement on year-ago (24 days), but a 2.6% decline from June’s DSR (26 days).
The resulting 15.6 million SAAR also would fall shy of June’s 15.9 million.


5/ Kelley Blue Book: Pickup Trucks, Compact Cars And Crossovers Drive July New-Car Sales Up 16 Percent

In July 2013, new light-vehicle sales, including fleet, are expected to be 1,340,000 units, up 16.1 percent from July 2012 and down 4.4 percent from June 2013.
The seasonally adjusted annual rate (SAAR) for July 2013 is estimated to be 15.8 million, up from 14.0 million in July 2012 and down from 15.9 million in June 2013.
“As new-car demand continues to improve with leases accounting for nearly 25 percent of all new-car sales, along with continued solid truck sales, we’ve improved our forecast for 2013 to 15.6 million units,” said Alec Gutierrez, senior market analyst at Kelley Blue Book. “Consumer confidence has a played a key role in the ongoing recovery and currently is at the highest levels seen since January 2008. With modest improvements in unemployment and housing expected to continue through the rest of the year, confidence likely will follow suit, driving new-car demand along with it.”

After Fiscal Mess, Uncertainty Concerning Monetary Policy is Coming in US

According to FT, Larry Summers, which is now seen as the front-runner to replace Fed Chairman Bernanke, made dismissive remarks about the effectiveness of quantitative easing at a conference in April, raising the possibility of a big shift in US monetary policy.


More from FT:


“QE in my view is less efficacious for the real economy than most people suppose,” said Mr Summers according to an official summary of his remarks at a conference organised in Santa Monica by Drobny Global, obtained by the Financial Times.
Mr Summers – who served as President Barack Obama’s chief economic adviser from 2009-2010 – has seldom spoken in public about monetary policy. Markets have little sense of his current thinking and may be surprised by his apparently hawkish stance on QE.


The disclosure of his remarks comes as the race for the Fed chairmanship is widely regarded as being between Mr Summers and Janet Yellen, the current Fed vice-chair, who has been an architect of its QE policies. The fact is that even if even Larry Summers seems to be backed by President Barack Obama, that’s not the case for a number of US Senate Democrats who sent a letter supporting Janet Yellen as the next Fed Chairman.


More from FT:


A number of US Senate Democrats are circulating a letter supporting Janet Yellen to be the next chair of the Federal Reserve in an ominous sign for supporters of Larry Summers.
The letter has been pushed by Sherrod Brown from Ohio, Senate officials said, one of the chamber’s leading liberals and a longtime critic of financial deregulation and trade liberalisation.
Signatories include Tom Harkin of Iowa, and Dianne Feinstein of California.
Senate officials said a single copy of the letter had been circulated to the chamber’s 54 Democrats. It is not known how many senators have signed the letter.


The second story shows that there could be some tensions in the Democrat Party in a context where President Barack Obama will confront with lawmakers (after a long August holiday) on a daunting list of decisions affecting the economy (“continuing resolution”, 2014 fiscal budget, fiscal consolidation plan and debt ceiling) and therefore will need the full support of his party. If he remains isolated and unable to find a compromise with Republicans, automatic, across-the-board budget cuts of $109 billion, could entry into force on October 1st.


In the meantime, if Larry Summmers is chosen, it could apply a less accommodative monetary policy which could increase uncertainty and the fear of a return into recession.