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Market insight 18.04.2018

Inflation trend: declining in UK, on a moderate rise in the Eurozone

Inflation trend: declining in UK, on a moderate rise in the Eurozone

Eurozone: CPI (March): 1% m/m as expected (prior: 0.2%)

  • Final inflation was finally lower than in first estimate: 1.3% y/y vs 1.4% y/y expected and 1.1% y/y past month.
  • Core inflation was stable (1% y/y), in line with estimate.
  • Ahead of the ECB meeting, inflation figures will comfort some ECB members (M. Draghi and Praet) in favour of a delayed end of QE and still the need of monetary support.

 

UK: CPI (March): 0.1% m/m vs 0.3% expected (prior: 0.4%)

  • Inflation trend has continued to ease: 2.5% y/y after 2.7% y/y prior month. Core CPI has eased in parallel (2.3% y/y from 2.4% y/y).
  • Upwards pressures on prices of food, clothes and leisure were compensated by lower prices of household apparels, transport and alcohol.
  • Inflation is easing and coming back closer to official target, as expected, after the rise due to oil prices and weak GBP past year. Nevertheless, the BoE should remain vigilant and there is still a high probability of a rate hike in May.

 

UK: PPI Input prices (March): -0.1% m/m vs 0.3% expected (prior: -0.4% revised from -1.1%)

  • Yearly trend in prices has rebounded from 3.8% y/y to 4.2% y/y.
  • Rises in energy and metals prices have been more than compensated by flat or declining prices in the other sectors over the month.

 

UK: PPI Output prices (March): 0.2% m/m vs 0.1% expected (prior: 0%)

  • Output prices have moderated from 2.6% y/y to 2.4% y/y.

 

Italy: Industrial orders (Feb.): -0.6% m/m (prior: -4.6% revised from -4.5%)

  • Industrial sales were slightly better oriented: +0.5% m/m after -2.9% m/m prior month.
  • Momentum still looks fragile in industrial activity.

 

Russia: Retail sales (March): 2% y/y vs 2.1% expected (prior: 1.8%)

  • Consumption was on a table trend thanks to rising disposable income ahead of elections.
  • Sanctions and potential rebound of inflation due to volatile currency may put the fragile recovery at risk.

 

Russia: Disposable income (real) (March): 4.1% y/y vs 3.1% expected (prior: 4.3% revised from 4.4%)

  • Real wages were up by 6.5% y/y; decline in inflation and rising wages ahead of elections have underpinned revenues and consumption growth.

 

Russia: Unemployment rate (March): 5% as expected (prior: 5%)


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