Will Italy confirm it is now out of recession?

  • Tuesday - German Consumer Confidence may fall, adding to concerns over the health of the Eurozone’s economic recovery.
  • Friday - Will Italy confirm it is now out of recession?
  • Friday - Is UK Consumer Confidence improving, and if so, does that increase the chance of a Bank of England (BoE) rate hike?

Tuesday 

The German GfK Consumer Confidence Index is set for release today. This important forward-looking indicator is expected to show a slide to 10.3 for June, down from the May print of 10.4 and making for the lowest reading in around two years. This echoes the European Central Bank’s (ECB) latest meeting minutes where policymakers expressed concern about the EU’s recovery.
 
The US Conference Board’s Consumer Confidence Index for May is set for release with forecasts for 129.8, an improvement on April’s figure of 129.2. The Federal Reserve’s latest meeting made it clear policymakers were in no rush to change monetary policy, but improving consumer confidence might start to tip the balance since Personal Consumption Expenditure correlated with the level of policy rate.

Wednesday

German Import Prices for April will be published, with the market looking for the year-on-year figure to drift higher. March’s reading of 1.7% is expected to rise to 2.0%, again something which is likely to drive inflation and result in a more hawkish ECB.

Thursday

US Wholesale Inventories for April will be released with a 0.3% build forecast, reversing the 0.1% contraction seen in March. With uncertainty among consumers lingering and the trade spat with China ongoing, growing inventories could point towards lacklustre demand for good. This has the potential to drive fresh calls for a Fed rate cut and could deliver some Greenback weakness.
 
Friday

May’s UK Consumer Confidence reading from GfK will be published, and although the number is set to remain deep in negative territory, a modest improvement from April’s -13 is forecast. A print of -12 would arguably be something worth applauding given the ongoing political uncertainty that is gripping the country, although it is unlikely to cause large moves in the Pound.
 
The final Italian Q1 Gross Domestic Product (GDP) reading will be released, and the market will be looking for confirmation that the country is out of recession. A print of 0.2% is forecast, up from the -0.1% seen in Q4. 
 
The Fed’s preferred measure of inflation, the PCE Deflator is due for release. Having stagnated in April, the month-on-month print is expected to tick up to 0.2%. This a key measure of inflation for the policymakers, so a rebound is crucial to retaining a balanced policy outlook.   
 
The University of Michigan Consumer Sentiment survey is due for release today and could round off the week with a degree of disappointment. Having printed at 102.4 in April, the highest such reading in 15 years, some softening is expected.