Market movers today
We have a heavy data calendar ahead of us in the euro area with unemployment and inflation being released at 11:00 CET today.
We expect the euro-area headline HICP inflation figure to decrease to 1.5% while core inflation should drop back to 1.0% in May from 1.9% and 1.2% in April, respectively. The relatively weak German inflation print yesterday lends support to this view. We think that the increase in both headline and core in April was largely due to Easter effects. Looking ahead, the support from the oil price continues to fade, meaning headline inflation is likely to fall throughout 2017 to as low as 1.0% towards the end of the year.
The euro-area unemployment figures are likely to show that the labour market continued to strengthen in April. We observed an unemployment rate of 9.5% in March and we expect a further decrease in April to 9.4%. Note that despite the falling unemployment, we still see few signs of wage growth picking up to support higher inflation (see Euro area wage growth should stay subdued, not supporting core inflation significantly , 5 May 2017). Note that the German unemployment rate is due for release an hour in advance of the euro-area figure.
In Germany, we get retail sales for April. In March, retail sales increased 0.1% m/m following the 1.1% monthly increase in February. We estimate another monthly increase for April of 0.4%, as Easter is likely to have boosted retail sales in April.
In China, we also get the Caixan manufacturing PMI. We look for a further weakening in PMIs over the coming quarters but a small increase in May is possible as the sharp drop in April may have been a bit too big compared to underlying developments.
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