German CPI, U.K. Jobs, EU Industrial Production

Wednesday is expected to bring some encouraging economic news for Britain and the eurozone. First, today’s update on consumer prices in Germany are likely to confirm that the disinflation risk was lower last month. Meanwhile, economists think that the UK will again report a drop in the number of workers claiming unemployment benefit. Also, industrial output for the EU is projected to post its third consecutive monthly rise in today's April release.

Germany Consumer Price Index (06:00 GMT): The annual rate of consumer inflation is no longer sliding, according to the preliminary estimate for May, the Federal Statistics Bureau reported late last month. Today’s second estimate is expected to confirm that disinflation's recent momentum reversed course. That’s a good sign, given the state of macro in Europe. The recession risk is still low in Germany, but its growth of late has been sluggish. Disinflationary winds aren't so easy to ignore when so many of the surrounding economies are stagnating if not contracting. The persistent deceleration in German inflation this year suggested that the Eurozone's malaise was spilling over the border. But the initial numbers for May now suggest otherwise.

Consumer prices are expected to increase by an annualized 1.5 percent through May, the government previously advised. At least one consensus forecast sees today’s revision to the preliminary estimate going even higher: 1.7 percent. Disinflation risk, in other words, is no longer a clear and present danger for Germany, even if the hazard still lurks elsewhere in the Eurozone.

UK Labour Market Report (08:30 GMT): Britain’s economy is enjoying a run of upbeat economic reports lately. Yesterday’s slightly better-than-expected update on industrial production for April is the latest example, and today’s release on the labour market data for May will probably extend the positive trend.

Although the unemployment rate is expected to remain unchanged, economists think that the claimant count for May will decline again. If so, that will mark the seventh straight month with fewer workers claiming jobless benefits. Growth is hardly robust in Britain, but the persistent drop in the claimant count makes a strong case for thinking that economy will remain on the mend. That’s also the message in the latest GDP estimate for the UK from the National Institute of Economic and Social Research (NIESR). “Our monthly estimates of GDP suggest that output grew by 0.6 percent in the three months ending in May after growth of one per cent in the three months ending in April 2013,” the group reported. The pace of expansion remains modest, but the overall direction looks promising and today's labour market news isn't likely to challenge that view.

EU Industrial Production (09:00 GMT): The market will be closely watching today’s April update on industrial output. In the previous release, the numbers held out the possibility that the sector was stabilising. That’s still a speculative view, although today’s report may further minimise the uncertainty for thinking positively.

The bad news is that the best-case scenario continues to rely on a wobbly set of data. March’s one percent surge in industrial production versus February is certainly impressive, but one month doesn’t tell us much. Indeed, even after March’s gain, the annual pace of industrial output for the Eurozone remains deeply negative. But here too the possibility of brighter days ahead looks tantalisingly plausible as the red ink for the year-over-year comparison inches closer to zero. Today’s numbers may bring us even closer to neutral. The consensus forecast anticipates a modest monthly gain for EU industrial output. If the prediction holds, that’ll make three monthly increases in a row.