Week ahead 12-16 May: GDP growth to rise in the eurozone, to decline in Portugal in Q1

WEEK IN REVIEW: ECB to ease policy in June

In Europe, President Draghi has hinted that the ECB is ready to take further action to ease monetary policy at the June meeting, sending the euro and eurozone bond yields lower. It remains unclear for now what form this would take.  The European Commission spring forecast anticipates that growth will remain moderate but is strenghtening due to a gradual easing on the back of deleveraging and lower financial segmentation. For the eurozone, the EC expects GDP growth of 1.2% in 2014 and 1.7% in 2015, inflation is seen at 0.8% in 2014 rising to 1.2% in 2015 and he unemployment rate is expected to decline only marginally to 11.8% in 2014 and to 11.4% in 2015.

In Portugal, the Government has published a report on a broad-based reform of the state, including changes to mandatory pensions’ contributions, privatizations, reduction int he number of civil servants, among others, to be implemented over the next few years. This is an ambitious programme but it is likely that many of these measures will have to be negotiated with unions and employers’ organisations or require the Constitutional Court approval. The unemployment rate fell from 15.3% in Q4 to 15.1% in Q1, mostly thanks to a decline in the labour force. Employment fell by 42 thousand between Q4 and Q1.

WEEK AHEAD: GDP growth to rise in the eurozone, to decline in Portugal in Q1

13 May: April Portuguese CPI inflation: After -0.4%yoy in March, the effect of Easter may boost inflation somewhat but it could remain in negative territory, particularly due to the wet weather

14 May: March eurozone industrial production: data for individual countries, including orders in Germany, were disappointing. Markets expect a 0.2%mom decline (+1%yoy) after +0.2%mom in February (+1.7%yoy)

15 May: Preliminary GDP will be out in many European countries. Markets expect eurozone GDP to rise from 0.3%qoq to 0.4%qoq, Weak IP data may jeopardize this rise. In Portugal, GDP surprised on the upside in Q4 rising 0.6%qoq, Macrometria expects a slowdown to 0.1%qoq in Q1.