29 Apr 2016
Euro area flash HICP tracking -0.1% y-o-y (-0.10%) in April – Nomura
Research Team at Nomura, suggests that following the German release and slightly weaker readings from Spain (April HICP -1.2% y-o-y vs our forecast of -1.1%) and Belgium (April CPI 2.0% y-o-y down from 2.2% y in March), they re-affirm their below-consensus euro area flash April HICP forecast of -0.1% y-o-y (Bloomberg consensus: 0.0% y-o-y).
Key Quotes
“We also continue to expect euro area core inflation to edge down to 0.9% y-o-y in April from 1.0% y-o-y in March, owing to the Easter-unwind effects discussed above.
Our euro area inflation forecast (via NORI) currently averages 0.0% y-o-y in Q2 2016, which is around 0.3pp higher than the March ECB staff projection. This largely reflects the c. 25% rise in oil prices in euros for this year on average since the cut-off date for technical assumptions in the ECB projections. On the basis of current oil futures prices, we expect April to be the last negative reading.
We currently expect headline inflation to edge up to around 0.1% y-o-y for the next couple of months, before moving higher in H2 (to average around 0.5% in Q3 and average around 0.9% in Q4). The ECB’s April Introductory Statement noted that inflation could turn negative again in the “coming months before picking up in the second half of 2016”.
With the short-term inflation outlook poised to deliver some slight improvement relative to the March ECB staff projections and the Governing Council’s focus remaining on the implementation of TLTROII and CSPP programmes in June, our baseline view remains that the Governing Council is unlikely to rush into further easing, particularly as implementation and effectiveness of recent measures take time to assess.
However, we remain cautious on the medium-term inflation outlook owing to subdued wage growth and our expectation of a slower recovery in core inflation than that of the ECB, underpinning our view that the ECB will have to do more later this year.”
Key Quotes
“We also continue to expect euro area core inflation to edge down to 0.9% y-o-y in April from 1.0% y-o-y in March, owing to the Easter-unwind effects discussed above.
Our euro area inflation forecast (via NORI) currently averages 0.0% y-o-y in Q2 2016, which is around 0.3pp higher than the March ECB staff projection. This largely reflects the c. 25% rise in oil prices in euros for this year on average since the cut-off date for technical assumptions in the ECB projections. On the basis of current oil futures prices, we expect April to be the last negative reading.
We currently expect headline inflation to edge up to around 0.1% y-o-y for the next couple of months, before moving higher in H2 (to average around 0.5% in Q3 and average around 0.9% in Q4). The ECB’s April Introductory Statement noted that inflation could turn negative again in the “coming months before picking up in the second half of 2016”.
With the short-term inflation outlook poised to deliver some slight improvement relative to the March ECB staff projections and the Governing Council’s focus remaining on the implementation of TLTROII and CSPP programmes in June, our baseline view remains that the Governing Council is unlikely to rush into further easing, particularly as implementation and effectiveness of recent measures take time to assess.
However, we remain cautious on the medium-term inflation outlook owing to subdued wage growth and our expectation of a slower recovery in core inflation than that of the ECB, underpinning our view that the ECB will have to do more later this year.”