The financial markets are closely scrutinising US economic releases to assess the strength of the US economy after being caught on the wrong foot with regard to the next Fed hike. Today, we are due to get two important indicators: (i) the Conference Board consumer confidence for May, which could reveal whether the US growth is driven by private consumption as many expect and (ii) PCE inflation figures for April on Tuesday. Headline PCE is the Fed's preferred price indicator and we expect headline inflation to be 1.1% y/y, driven mainly by higher gasoline prices, while the core index should increase 0.1% m/m (but it is a close call between 0.1% and 0.2%) implying a core inflation rate of 1.5% y/y (1.6% y/y).
In the euro area, we expect the euro area HICP inflation figures for May to indicate a low inflation number at -0.2% y/y similar to the level in April. Core inflation should also remain unchanged at 0.7%, similar to April and thus not recovering to the 1.0% level seen in March. Data for the euro area money supply developments for April is also due out. Growth of the M3 money supply averaged 5.0% leading up to April and we estimate the growth rate remained high with a further modest increase in April. We expect focus to be on bank lending figures, as they are key indicators for economic growth and important for the ECB's TLTRO II loans, determining whether banks will have a negative or zero interest rate on the loans.
Finally, euro area unemployment rate data for April is due out and we expect the declining tendency to continue. Specifically, we expect the unemployment rate to decline to 10.1% in April from 10.2% in March and, hence, narrow further towards the European Commission's estimate of the structural unemployment rate of 9.7%.
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