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US: Consumer and business (Richmond) confidence fall

US: Consumer and business (Richmond) confidence fall

In the US, consumer confidence fell to 107.2 in March from 111.2 in February, as rising fuel prices and housing market worries weighed on consumer sentiment. It was the first decline in five months and it was somewhat more pronounced than expected (108.5). The decline was entirely due to a fall in the expectation index (to 86.9 from 93.8), as the present situation was little changed.

The S&P/Case-Shiller house price index showed annual house prices in the US falling for the first time since the introduction of the index in 2001. In January, house prices fell 0.58% M/M and 0.2% Y/Y. On a three-monthly annualized basis, prices even fell 6.4% compared to 4.96% in the previous month, which suggests that the decline in prices is accelerating. As such, the house price index may be expected to fall further in negative territory in the coming months.

The Richmond Fed survey on manufacturing showed that the sector remains firmly in contractionary territory. The headline, shipments, index stabilized at -10, staying in negative territory for the fourth consecutive month. New orders lost 7 points to -11, order backlog dropped 9 points to -13 and while the number of employed rose 4 points, at -9 it stays firmly below zero. Both price indices eased slightly.

EMU: German IFO surprises on the upside

In March, the German IFO unexpectedly rose again to 107.7 from 107 in February, while markets had been looking for a slight decline to 106.5. Both the current assessment and the expectations contributed to the improvement. Hence, the slight decline in the first two months of the year, which was probably due to the VAT increase, has not continued. This indicates that the upswing is still strong and robust. The improvement was mainly due to the manufacturing and retail sector, which is a positive in the light of the VAT increase. However, in Italy business sentiment deteriorated slightly from 95.5 in February to 94.9 in March. As a whole business confidence improved in Germany and France, while it slightly deteriorated in Italy, Belgium and the Netherlands. The strong performance of the two largest euro zone economies suggests that any slowdown is likely to be very modest.