Week Ahead: Spotlight on the ECB

WEEK IN REVIEW: European Sentiment indicator edges up

In Europe, the European Commission ESI rose from 102.0 to 102.7 in May (it was 102.5 in March), showing that growth appears to have stabilised at a moderate rate in the beginning of the second quarter.  Among the countries that we follow, Portugal reported the biggest rise, up 1.5 points. With the exception of construction in most countries, the remaining sectors report confidence levels relatively close or above their long term averages, signalling that the recovery is underway.

In Portugal, industrial production was up 5.5% mom in April, after two drops in February and March, as it recovers from the temporary shutdown in an oil refinery plant.

In the US, GDP was revised down from +0.1%qoq annualised in Q1 to -1.0%qoq annualised. The revision was mostly due to a fall in stock-building, moreover, the weakness in Q1 is reported to have been caused by extreme bad weather. Analysts expect that Q2 should record a significant correction, fueling the case for the Fed to start normalising monetary policy.

In the Portuguese-speaking world, a recent analysis by the Overseas Development Institute estimates that Angola could be one of the countries suffering most from the expected rise in shale gas production in China.  Based on the estimated impact of shale gas production in the US on its oil imports,  The report suggests that GDP growth in Angola could be 1% lower relative to a scenario with no shale gas production rise.

WEEK AHEAD: Spotlight on the ECB

A string of euro area data ahead of the ECB meeting should support the case for further easing

3 June:

  • Eurozone May flash HICP inflation: analysts expect inflation to remain stable at 0.7%yoy.
  • Eurozone unemployment rate: analysts expect it to remain unchanged at 11.8. The recovery so far has not been strong enough to translate into a very large improvement in the labour marke

4 June:

  • Euro area GDP details to be released

5 June

  • ECB monthly meeting: markets expect a 15 bps drop in the refinancing rate to 0.1%, as President Draghi left the door open for action at the meeting last month. Recent hard data on growth, which stabilised at a feeble 0.2%qoq in Q1 in the euro area, together with vey low infltion, supports this decision.