In February, the ifo business climate for Germany will probably have either remained stable or improved slightly, as the ZEW economic sentiment did. The US ISM manufacturing index rose in January. The DAX has gone up and German yield spreads have widened, because long-term interest rates have increased more than short-term interest rates. However, crude oil prices have continued to rise and the euro has appreciated.

Most of the business and consumer confidence indicators in the EMU could have gone up somewhat in February. This applies to the EMU economic sentiment and industrial confidence, the Purchasing Managers’ Index for the manufacturing sector in Germany and in the eurozone, the Italian business and consumer confidence and the Belgian business confidence. However, the French consumer confidence in February and the German GfK consumer climate for March are more likely to have remained unchanged. The EMU consumer confidence is not expected to be revised significantly.

German GDP in Q4 2010 is unlikely to be revised substantially either. The detailed breakdown of the components will show that net exports, investment in machinery and equipment and private consumption contributed positively to overall GDP growth, while construction investment declined, just as we had forecast before the flash release.

French consumer confidence continued to deteriorate, which suggests that French consumer spending will probably have remained unchanged in January. The same goes for EMU industrial new orders in December, as the corresponding German figure dropped.

The preliminary results for national German CPI in February will be released next Friday. We expect German consumer prices to have increased markedly by 0.6% month-on-month, which would lift the annual rate to 2.2%. Due to typical seasonal effects, prices for package tours and accommodation are likely to have been higher than in January. Clothing will probably have been more expensive too. There are mixed signals from energy products: gasoline is expected to have been cheaper than in January, whereas prices for diesel and heating oil have gone up. Several utilities are likely to have increased their electricity tariffs as from February 1st. Furthermore, we expect food prices to have risen again.

M3 growth fell to 1.7% yoy in December, down from 2.1 % the previous month. Monthly flows have been extremely volatile in recent months. After having increased by €49bn in November, M3 contracted by about €14bn in December. As a general trend, we expect the monetary expansion to continue in line with the economic recovery. However, given that market interest rates are still very low, the pace of monetary growth is likely to be moderate. We expect annual M3 growth to have accelerated to 2.1% in January, mainly due to a base effect. Credit growth (loans to the private domestic non-bank sector) could have risen to 2.3% yoy, up from 1.9%. Whereas households are starting to take advantage of historically low interest rates, especially for house purchases, and business activity is picking up, banks still remain reluctant to expand their balance sheets.

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