Today brings US GDP figures for Q1. The Fed Atlanta GDP nowcast shows growth in Q1 of 0.5% q/q AR, soft data indicates growth in the region of 1.5-2.0%. We expect to land somewhere in between and forecast GDP growth of 1.0% q/q AR in Q1.
We will also get PCE core inflation for Q1. If the current trend in monthly PCE core increases continues (implying increases of around 0.1% m/m), PCE core inflation would come in at 2.2% q/q AR. However, note that although this may give the impression that inflation has reached its target, the Fed is more concerned about PCE core inflation y/y, which will be significantly below 2% almost no matter what the March print comes in at.
Today, the euro area flash inflation figure is due for release. Following the decline in headline inflation to 1.5% y/y in March, we look for an increase to 1.8% y/y in April (revised from 1.7% after higher German and Spanish data yesterday). In line with the fall in March, this is due mainly to the early timing of Easter in 2016, which is causing volatility in prices of package holidays. This is also reflected in core inflation, which we estimate will increase to 1.0% y/y in April from 0.7% y/y in March. Looking beyond the Easter volatility, we expect headline inflation to decrease below 1.5% y/y, as the support from the oil price fades, while core inflation should also be back around 0.8-0.9% y/y.
ECB's Survey of Professional Forecasters is also due for release. The longer term (five-year) inflation expectations in the survey have been stable at 1.8% over the past year.
In Scandinavia it is time for labour data in Norway and retail sales in Norway and Sweden.
To read the entire report Please click on the pdf File Below