MNI 5 THINGS: EMU February IP Could Disappoint Expectations

Repeats Story Initially Transmitted at 17:01 GMT Apr 11/13:01 EST Apr 11

--EMU February Industrial Production Data Due for Release Thurs

     LONDON (MNI) - Eurozone industrial production fell to its lowest level, on

a year-on-year basis, since last April in January, tentatively suggesting growth

momentum in the area might be easing slightly. On a monthly basis, output was

down 1.0% in January, below market expectations. Data released Thursday will see

if output managed to conjure up an improvement or whether this slightly weaker

form was extended.

     Ahead of the release, we outline five themes we feel warrant particular

attention.

     - Slight bias for markets to overstate Feb IP. 

     Analysts have a slight tendency to overestimate February euro area IP. Over

the past decade the market consensus has come in above the actual result exactly

half of the time, with the average downside surprise being -0.5pp. On the four

occasions the markets have underestimated y/y IP, the average miss has been much

bigger at 1.0pp. The market expectation, taken from Bloomberg, looks for euro

area output to increase by 3.5% on the year in February.

     - IP data from the 'big four' came in shy of analyst expectations. 

     February's IP data from across the main euro area economies almost all

posted downside data surprises, suggesting the final aggregate euro area result

may also underwhelm. German y/y industrial production came in 1.9pp lower than

expected, Italy 2.2pp lower and France 0.3pp lower. Spain was the only of the

'big four' to surprise to the upside.

     Table 1 - Feb IP across the 'Big Four'- Actual Vs Market Consensus

                                       Germany  France   Italy   Spain

----------------------------------------------------------------------

February Industrial Production, % y/y     +2.5    +4.0    +2.5    +3.1

Market Consensus, % y/y                   +4.4    +4.3    +4.7    +3.0

Data Surprise                           -1.9pp  -0.3pp  -2.2pp  +0.1pp

     - PMIs Signal Overall Expansion. 

     Three of the 'big four' European manufacturing sentiment PMIs lost ground

in February, with Spain the only to post a gain. Moderations across in

manufacturing activity in France, Italy and, to a lesser extent, Germany were

enough to take the overall euro area manufacturing PMI down to 58.6 from 59.6 in

January.

     - European Confidence Down in February. 

     It appears that confidence among production-based firms across the euro

area has started to temper. The European Commission's Business Climate Indicator

(BCI) dropped to +7 in February, the joint-lowest since last August, receding by

a further point to 6 in March. It had hit a local peak 9 in December and

January. Still, the March result remains above the series average of -6 and

level with the 12-month average.

     - Producer Prices Slipping. 

     Growth in producer prices fell for the third straight month in February,

down a percentage point to 1.2% y/y. The lack of upward impetus, perhaps

reflective of unspectacular demand, explains why core inflation failed to match

analysts' expectations for a percentage point rise to 1.1% on the month.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com