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We expect the euro-area manufacturing PMI to edge higher in March, as indicated by our model, which is based on real M1 growth and the effective euro. The stronger order-inventory balance in February also points to higher manufacturing PMI. For services PMI we forecast a small increase, mainly reflecting the boost to private consumption from the decline in the oil price. We forecast GDP growth of 0.5% q/q in Q1 15 (consensus 0.4% q/q) up from 0.3% in Q4 14.
US inflation data are likely to show some stabilisation with a 0.1% m/m increase and 1.6% y/y in core CPI. However, we expect core goods prices to drag overall core inflation lower over the coming months as the stronger USD and lower commodity prices exert downward pressure on core goods prices. Headline CPI remains depressed by continued low energy prices and we expect CPI at 0.0% m/m, which will take the annual rate into deflation territory at -0.3%.
Inflation is also up in the UK and we look for unchanged core inflation at 1.4% y/y, slightly higher than consensus of 1.3% y/y. As in the US, inflation is currently held down by a strong currency and lower commodity prices.
US releases Markit manufacturing PMI, which has proved to be a more reliable indicator that ISM over the past year. The index increased in early 2015 after a sharp drop in late 2014. It is expected to fall slightly in March to 54.6 from 55.1.
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