020 7898 0500The eurozone’s inflation rate was expected to dip from 1.3% to 1.2%, but it actually came in below forecast to hit just 1.1%. The surprising extent of the fall (which is the lowest inflation rate since December 2016), was put down to the prices of processed food, alcohol, tobacco and non-energy industrial goods rising less than initially thought. It might concern the ECB, as it appears their QE programme is not having the desired effect.
Wage growth also came in below expectations and, while it did increase, it did so to 1.7% from 1.6% when 1.8% had been expected. This is certainly a situation to keep close tabs on, as it could force the hand of the ECB. Quite what it will encourage them to do is unknown, but inflation cannot keep falling as much as it is. Interesting to consider how different this situation is to the UK, where inflation is continually outpacing wage growth.
Today we will have the balance of trade for January and on Tuesday we will have the German ZEW economic sentiment index. We will also see the consumer confidence flash reading for March. Thursday sees the German Markit manufacturing purchasing managers’ index for March and we will also see the Ifo business climate.
