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Europe seen brushing aside Paris attacks

Published 21/11/2015, 10:32
© Reuters. People light candles to pay tribute to the victims of the Paris attacks at the Miroir d'Eau (Mirror of Water) in Nantes
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By Philip Blenkinsop

BRUSSELS (Reuters) - Europeans determined not to be defeated by the deadly Paris attacks can take comfort on one front - the economic impact so far has been limited and may well turn out to be slight.

Data due in the coming week may offer further early signs of that resilience with a series of consumer and business surveys, albeit most largely carried out before the Nov. 13 shootings and suicide bombings in the French capital that killed 129 people.

Markets have already rebounded.

Shares in airlines and hotel chains, including Air France-KLM (PA:AIRF) and Accor (PA:ACCP), tumbled when trading began on Monday, but most recovered lost ground in the ensuing days. The STOXX European 600 travel and leisure index (SXTP) was up over the course of the week, while the pan-European stock index (FTEU3) hit a three-month high on Thursday.

Economists say that consumer sentiment is the most likely casualty of the sort of coordinated militant attacks seen in Paris, with business confidence next in line.

However, morale among German analysts and investors this month snapped a seven-month run of falls, the ZEW think tank survey showed last Tuesday, even with 40 of the 225 responses coming in after the attacks.

France's state statistics agency INSEE will release its monthly business and consumer sentiment surveys on Tuesday and Wednesday respectively and both are expected to be unchanged. Consumer confidence in the euro zone's second largest economy dipped slightly last month from September's eight-year high.

INSEE has said that its consumer survey will include only three days of responses in the past week, representing around 7 percent of all those surveyed. The bulk of business sentiment input will also be from the two weeks preceding the attacks.

The full picture may only then emerge a month later.

Commerzbank (DE:CBKG) chief economist Joerg Kraemer said that even the Sept. 11, 2001 attacks in the United States barely dented the U.S. economy. "What we did see was that retail sales fell, only to recover a month later," he said.

ING's chief euro zone economist, Peter Vanden Houte, said Paris hotels, restaurants and tourist sites might feel a pinch, but the overall short-term impact was likely to be muted.

More significant, he said, could be the longer-term effect of increased security measures.

"There's a small positive in terms of government spending, but there's a risk of hampering international transport and free movement on goods and services. In economic terms, every euro spend on more security is inefficient spending," he said.

"Could it push the ECB to loosen monetary policy? It's a further headwind, but they have already indicated they will do something in December."

GERMAN MOOD, U.S. GROWTH

Beyond France, the coming week will kick off with flash purchasing manager indices for the euro zone countries, Japan and the United States, all seen broadly flat.

They showed in October that euro zone business activity picked up by more than expected, U.S. industry growth accelerated and Japanese manufacturing rebounded in a sign that they are shaking off the Chinese economic slowdown.

Major indicators for China itself are not due until Dec. 1.

German business sentiment, to be revealed by the Ifo institute on Tuesday, is meanwhile expected to slip, including the expectations component which rose to a seven-month high in September.

Sentiment appeared unaffected by the emissions scandal that rocked Germany's largest carmaker Volkswagen (DE:VOWG_p), but that has now widened to include vehicles' carbon dioxide as well as nitrogen oxide output.

"There may be more capture of the VW story. Will Ifo show an impact on the rest of German industry or continue to indicate it is an isolated matter?" Vanden Houte said.

Whatever the numbers, there seems nothing will steer the European Central Bank from fresh stimulus measures at its Dec. 3 meeting, with ECB President Mario Draghi saying on Friday that it was ready to act to raise anaemic inflation.

By contrast, the U.S. Federal Reserve is widely expected to raise interest rates for the first time in nearly a decade when its policymakers meet on Dec. 15-16.

Members of its policy-setting committee say they will continue to scrutinize incoming data, but the only data of note in a week shortened by American Thanksgiving Day on Thursday will be the second estimate of U.S. economic growth on Tuesday.

© Reuters. People light candles to pay tribute to the victims of the Paris attacks at the Miroir d'Eau (Mirror of Water) in Nantes

Economists see a revision to an annual rate of 2.0 percent in the third quarter from the initial estimate of 1.5 percent from 3.9 percent in the second quarter. A drawdown of inventories was the chief drag.

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