22 April 2002, 09:37 UTLOOK Euro zone data to provide clearer guide to industrial prospects
LONDON (AFX) - Euro zone economic data over the coming week should
provide investors with a clearer indication about industrial prospects
on the continent over the coming months as well as some encouraging
inflation news.
Despite the rise in oil prices, inflation in Italy and Germany is
expected to be held in check as other price pressures remain subdued.
And euro zone money supply figures should show a further slowdown,
providing the European Central Bank with a further motivation to hold
rates at 3.25 pct for a little bit longer, economists said.
"The economic backdrop (falling import prices over the past year,
weak demand and ample spare capacity) point to a further diminution of
underlying price tensions, signs of which need to appear soon for
continued optimism about the medium-term inflation outlook to be
sustained," said Royal Bank of Scotland economist Nigel Anderson.
However, Anderson cautioned that the benign inflation outlook could
still be at risk from stronger wage growth, particularly in the
aftermath reached in the German chemical sector.
If wages rise excessively at the bottom of the cycle when
unemployment is high, then the usual economic chain is broken, he said.
"That explains the ECB's continuing pre-occupation with structural
reform," he said. "It does not want the blame if stubborn inflation
forces it to tighten policy relatively early in the cycle."
As well as the inflation data, economists will be closely watching
the latest Ifo survey of German business activity.
Bank of America economist Lorenzo Codogno is forecasting a small
correction following last month's "remarkable" rise.
"In addition, some concerns about the situation in the Middle East
and the spike in oil prices should have motivated more cautious
expectations, while current conditions should have slightly improved,"
he said.
Nevertheless, most economists are factoring in a slight increase,
with Credit Suisse First Boston economist Neville Hill arguing that the
gap between future expectations and current conditions is now at its
widest since 1983.
"When the gap has been as wide as this in the past, current
conditions have usually risen by around 2-3 points in the month
following," he said. "That should mean another rise in the Ifo
headline."
Economists also anticipate a rise in the French INSEE survey for
April.
"While the leading components of the INSEE survey have recovered
from their sharp deterioration post-September, they have not seen the
kind of rebound seen in the Ifo survey," said CSFB's Hill. That may be
because the French industrial sector is less exposed to the global
rebound than its German counterpart."
© 1999-2024 Forex EuroClub
All rights reserved