The ECB stays cautious due to low and fragile core inflation
The ECB has not changed its current strategy
- The ECB has recognized that the slowdown in Q1 was broad based, but it was mainly due to temporary factors; so the ECB remains confident on growth.
- The inflation should finally converge at/or slightly below 2%, but the ECB has noticed that the core inflation has not shown convincing signals of being on an upward trend; for this reason, a still large monetary accommodation still looks justified according to the ECB.
- According to M. Draghi, there was no discussion on monetary policy; no pre-commitment of any change in the ECB’s communication in June.
- As core inflation is not a firm trend, the ECB will take some time before officially shifting its communication and its strategy. This increases the probability of a change in communication only in the next July meeting and favors a smooth end of the QE in Q4-18.
US: Initial jobless claims (Apr.21): 209k vs 230k expected (prior: 233k revised from 232k)
- Continuing claims: 1837 k after 1866 k.
US: Durable goods orders (March): 2.6% m/m vs 1.6% expected (prior: 3.5% revised from 3%)
- Orders have been boosted by civil aircrafts (44% m/m).
- Orders for capital goods non-defense ex aircraft (core orders) were down by 0.1% m/m after 0.9% m/m the prior month. By sector, the picture was mixed: a rebound in computers, but falling orders for machinery and flat in equipment.
- Shipments were up by 0.3% m/m (-0.7% m/m for core orders); inventories were up by 0.1% m/m (+0.3% m/m for core orders).
US: Wholesale inventories (March): 0.5% m/m vs 0.7% expected (prior: 1%)
- Inventories of durable goods were up close to 1% m/m.
Germany: GFK consumer confidence (May): 10.8 as expected (prior: 10.9)
- Some cautiousness on future activity and income, despite good fundamentals.
Spain: Unemployment rate (Q1-18): 16.74% vs 16.45% expected (prior: 16.55%)
- Unemployed has surprisingly decreased by close to 2% over the quarter; this could be viewed as a pause in a still positive trend.