BoJ's Summary of Opinions to be published

Emily Nicol
Chris Scicluna

European Commission survey likely to signal modest recovery momentum, while flash March inflation estimates from member states in focus
The coming week will bring a few top-tier releases from the euro area, including the Commission’s March business and consumer surveys (Wednesday) and February bank lending figures (Thursday), as well as preliminary March inflation estimates from various member states including France, Italy (both Friday) and Spain (Wednesday). Like last week’s flash PMIs, the Commission’s economic sentiment indicator (ESI) – arguably the best guide to euro area GDP growth – is likely to signal ongoing modest recovery momentum at the end of Q1. Admittedly, the ESI slipped back in February to remain some 4½% below the long-run average. But this still left it trending 0.9pt above the Q4 average and therefore consistent with a return to modest positive GDP growth in Q1. The country ESIs, however, are likely to imply ongoing divergences in conditions across the region, with contraction in Germany – reflecting persisting challenges in manufacturing and construction – contrasting with an accelerated rate of growth in Spain. Meanwhile, the latest bank lending figures will further illustrate the dampening impact of high borrowing costs on loan demand, while declining deposit holdings will continue to keep money supply growth firmly in negative territory, signalling ongoing soft economic growth and low inflation.

The March consumer price figures might well be exaggerated by the relatively early timing of Easter this year, as well as base effects associated with the ongoing gradual withdrawal of energy support measures. Indeed, while the French headline HICP rate is forecast to fall a further 0.3ppt to 2.9%Y/Y, Italian HICP inflation is expected to have increased 0.6ppt to a still-low 1.4%Y/Y, while Spanish inflation is forecast to rise back above 3%Y/Y. Other releases due in the coming week include German retail sales figures for February and unemployment numbers for March (both Thursday).

BoJ summary of opinions, Tokyo CPI figures for March, and IP, retail sales and labour market data for February due
After the BoJ’s decision last week to end negative rates and YCC, one focus in Japan this week will be the Summary of Opinions from that meeting (to be published on Thursday), for any further insight into the Policy’s Board’s discussions around the near-term outlook for policy. But with BoJ Governor Ueda noting in his press conference that future decisions will be data-dependent, of as much interest might be the release of the BoJ’s estimates of underlying inflation in February (tomorrow) and, in particular, the March release of Tokyo CPI on Friday. The Tokyo headline CPI rate is expected to move sideways at 2.5%Y/Y, while the core CPI measure (excluding fresh food) is expected to have edged slightly lower, by 0.2ppt to 2.3%Y/Y. The BoJ’s preferred rate of core CPI, excluding fresh food and energy, is also expected to have moderated slightly, but remain firmly above the 2% target at 2.9%Y/Y.

The end of the week will also bring usual month-end deluge of top-tier releases, including figures for industrial production, retail sales and the labour market. After industrial production slumped 6.7%M/M in January as autos production fell sharply – related to a halt in output at Toyota’s small-car unit following concerns that safety tests at Daihatsu had been rigged – expectations are for only a modest increase in February, by 1.3%M/M, to leave the manufacturing sector firmly on track to be a sizeable drag on GDP growth in Q1. Meanwhile, retail sales are expected to post a second successive monthly increase (0.6%M/M), while the unemployment rate is expected to have moved sideways at a post-pandemic low of 2.4%.

February personal income, spending and PCE deflators the highlight from the US
In the US, likely of most interest will be the release on Friday of February figures for personal income and spending, as well as the associated deflators that are closely watched by Fed officials. Income is forecast to have risen a further 0.3%M/M supported by a rebound in hours worked following the weather-related disruption at the start of the year. And supported not least by a rise in car sales, spending is expected to have accelerated in February following a slowdown at the start of the year, with Daiwa America’s Lawrence Werther forecasting a rise of 0.6%M/M, a touch above the Bloomberg survey consensus. Meanwhile, following the upside surprise to consumer and producer prices that month, the core PCE deflator is expected to increase 0.3%M/M, a touch softer than in January but nevertheless the second-firmest reading since last May. Meanwhile, advance figures for February durable goods orders (tomorrow) are expected to report a first rise in three months, albeit reversing only a fraction of the 6.2%M/M drop in January related to a slump in Boeing orders. When excluding transportation, orders are expected to remain subdued at just 0.2%M/M. Advance goods trade figures for February (Friday), will be released after updated Q4 GDP data on Thursday, with the latter expected to broadly align with the previous reading that reported surprisingly solid growth of 3.3%Q/Q annualised. Various housing market figures include new home sales (today), FHFA and Case-Shiller home price indices (tomorrow), and pending home sales (Thursday).

Updated national accounts figures to confirm contraction in UK GDP in Q4
Ahead of the Easter break, the week ahead will be particularly quiet for UK data releases. After last week’s figures reported a pause in retail sales in February, the CBI distributive trades survey (due today) will offer further insights into retail conditions in March. While the headline sales balance remained in negative territory in February, it was nevertheless the highest for ten months. And the improvement in households’ financial expectations, easing price pressures and better weather might well have brought a further modest pickup in sales this month. The only other release of note will be updated national accounts figures for Q4 (Thursday), which are expected to confirm that GDP contracted 0.3%Q/Q last quarter, to leave it output down 0.2%Y/Y. The previous estimate saw net trade provide a significant drag (-0.6ppt) offsetting a pickup in fixed investment (+0.3ppt). Given the deterioration in the trade balance, the current account deficit – to be published for the first time – is expected to have widened in Q4 (from £17.2bn in Q3), albeit likely remaining less than half the series high recorded in Q322. Aside from the data, the BoE’s latest Financial Policy Committee meeting summary and record will be published on Wednesday.

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