Written Commentary
Inflation data dominates the statistical schedule, with UK CPI and PPI to digest along with EU-27 auto sales, while South Africa and final Eurozone CPI and Current Account lie ahead, as the Eid Al Fitr (end of Ramadan) holidays get underway in Islamic countries. Tesla heads the run of Q1 corporate earnings, which also has results from Abbot Laboratories, Alcoa, Discover Financial Services, IBM, Kinder Morgan, Morgan Stanley and Nasdaq. On the central bank front, there is plenty of ECB speak, most notably Lane and Schnabel, while the Fed’s Beige Book will be very closely watched, after some very mixed signals on the US economy in recent weeks. In the commodity space, the annual India Steel conference gets underway, the US EIA publishes weekly oil and ethanol inventories, and the USDA March Milk Production. A busy day for govt bond auctions has sales in Greece, Germany, UK, Canada and the USA.
** U.K. – March CPI, RPIi and PPI **
UK inflation data are expected to see a reversal of the unexpected rebound in February, with a more modest 0.5% m/m rise enabling a base effect driven fall in headline CPI to 9.8% y/y from 10.4%, and a more modest dip in core CPI to 6.0% y/y from 6.2%. That trend of sharper falls in headline than core CPI will accelerate in coming months and persist through year end, above all due to energy, and to some extent food base effects, while core Services prices remain sticky. PPI is expected to underline that pipeline pressures are easing quite rapidly, with Input seen down 0.3% m/m to bring y/y down very sharply to 7.0% from 12.1%, and Output down 0.2% m/m to take y/y to 8.5% from 12.1%. Even with the higher-than-expected Average Weekly Earnings yesterday, and as noted in the Week Ahead, the BoE’s May rate decision is more a judgement call rather than being genuinely data driven, given that last week’s Q1 Credit Conditions confirmed a further tightening in financing conditions, fiscal policy remains restrictive, and indeed unpredictable and erratic (and per se very unconducive to much needed investment), and with 390 bps of tightening in this cycle still working its way through the economy with a lag (above all property), and the economy hardly firing on all cylinders, with the tightness of the labour market owing largely to structural rather than cyclical factors, a case for pausing can certainly still be made.
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