In April, euro zone HICP inflation accelerated, while the consensus was looking for an unchanged figure. According to the first estimate, euro zone CPI inflation rose from 2.7% Y/Y to 2.8% Y/Y, while inflation was expected to stay unchanged at 2.7% Y/Y. National data show that inflation rose significantly in Germany (2.6% Y/Y from 2.3% Y/Y), Italy (3.0% Y/Y from 2.8% Y/Y) and Spain (3.5% Y/Y from 3.3% Y/Y). Probably, prices of energy continued to rise, while also hotels & restaurants and leisure became more expensive in April, due to the Easter Holidays. Information about the details will be available with the final release of the CPI data. As inflation again surprises on the upside of expectations, it strengthens the case for the ECB to raise rates further in the coming months and we believe the next rate hike might come in June rather than in July.
In March, the euro zone unemployment rate stayed unchanged from the previous two months. As expected, the euro zone unemployment rate stabilized at 9.9% in March. The number of people unemployed fell by 9 000 to a total level of 15.596 million. Among member states, the lowest unemployment rates were observed in the Netherlands (4.2%), Austria (4.3%) and Luxembourg (4.5%) and the highest in Spain (20.7%). The euro zone unemployment rate has probably reached its peak last year (at 10.1%) and is now recovering slowly, but at an uneven pace across member states.
European Commission’s economic confidence fell for a second consecutive month in April. The headline index fell from 107.3 to 106.2, slightly below expectations (107.0). The details show a decline in business (5.8 from 6.7), consumer (-11.6 from -10.6), services (104. from 10.8) and retail (-1.8 from -1.4) confidence, while sentiment in the construction sector (-24.2 from -25.4) improved slightly. National details show that the easing in sentiment was wide-spread both across core and non-core EMU countries, showing that the momentum is easing somewhat.
In March, growth in euro zone M3 money supply accelerated from an upwardly revised 2.1% Y/Y to 2.3% Y/Y, slightly above the consensus estimate, but still significantly below the ECB target of 4.5% Y/Y. Lending data show a mixed picture as growth to loans in the private sector slowed (from 2.6% Y/Y to 2.5% Y/Y), while growth in loans in non-financials accelerated (from 0.6% Y/Y to 0.8% Y/Y). Loans to households accelerated further from 3.0% Y/Y to 3.4% Y/Y. Money supply remains at rather subdued levels, indicating that inflationary pressures remain limited; nevertheless, the lending data have probably reached a turning point and are now slowly improving, despite still tight conditions.