Intesa Sanpaolo : Euro area : we expect the ECB to announce an upward revision of growth and inflation forecasts for 2021, with potential fallouts on the medium term as well.
Weekly Economic Monitor – 04 Juni 2021
Intesa Sanpaolo – Research Department
The widening of swap spreads on government bonds could justify confirmation of PEPP purchases at the same pace as in the past few months.
The week’s market movers
In the euro area , apart from the ECB meeting, the week will be rather quiet in terms of market movers. The German ZEW, the first June related survey, should anticipate the acceleration of the German recovery. In our view, the round of April industrial output data releases in the major euro area countries should confirm the recovery trend. Lastly, the final reading of Q1 GDP in the Eurozone should confirm the decline outlined by the advance estimate, with foreign demand and consumption making negative contributions, as opposed to a growth in investments.
This week only a few data releases are lined up in the United States , and the flow of Fed speeches will be put on hold in the run-up to the FOMC meeting. The May CPI will in any case act as a powerful catalyst, after the April reading beat expectations on the upside. The forecast is for another solid increase, with the core index expected higher by 0.5% m/m and 3.5% y/y, and headline inflation at 4.6% y/y, probably marking a peak for 2021. Consumer confidence should rise back in June after dropping in May, with inflation expectations probably stabilising. The April trade balance should outline a narrowing of the deficit, determined in part by the contraction of exports due to supply bottlenecks.
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