April 16, 2021
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EA: inflation rising with a soggy bottom

  • EA HICP inflation for Mar-21 was confirmed at 1.3% y-o-y while the ex-tobacco index was marginally weaker than expected at 106.09 (Heteronomics: 106.12) for 1.26% y-o-y. Clothing was softer with transport and housing offsetting, mostly owing to Italy changes.
  • The headline rate is set to rise further from base effects over the next two months before slumping in July. A likely rise above target in the Autumn should be fleeting as underlying inflation provides a soggy bottom rather than a firm foundation.

April 16, 2021

HEW: ECB and the RPI preview

  • Inflation data have dominated the release calendar over the past week, although Sweden and the final Euro area prints were in line with expectations. It’s the UK’s turn next week, where we expect mixed surprises, as explained in one of the previews below. We preview the ECB’s policy announcement on Thursday below too.
  • The UK schedule also contains the flurry of other monthly releases. We are a tenth above the consensus on wages, owing to the surge shown on payroll returns, and will be watching the March retail sales data as one of the first official releases covering the UK’s gradual re-opening. February GDP data on 13 April showed a pathetically flat performance, albeit with accompanying trade data rebounding from January disruption (see UK: trade rebounds better than GDP).
  • We also dug into the NextGenerationEU package, which attracted more attention this week when additional funding details were announced. Aspects of this could become more significant in the weeks and months ahead. We also remain sceptical about its ability to fix the fundamental flaws in the European project, which could be exposed by a less amenable German Chancellor (EU: Waiting in the wings for Hamilton).

April 14, 2021
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EU: Waiting in the wings for Hamilton

  • The current Covid19 crisis is an opportunity for the EU to force the door open a little further towards sharing debt - the Hamiltonian moment.
  • However, the attitude of any new German administration to further fiscal entanglement with southern Europe is unclear. We believe the doom loop has yet to be extinguished.