Unlock Editor's Digest for free
FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
Inflation in the euro zone is expected to slow slightly to 2.5% in March figures to be released on Wednesday, providing support for both sides in the debate over how quickly the European Central Bank should cut interest rates.
Most economists expect consumer price growth to slow from 2.6% last month. The rise in commodity and food prices is expected to be small, but largely offset by higher oil prices and the early impact of the Easter period, when package travel and airline ticket prices are expected to rise.
UniCredit economists said: “The strength in core inflation should reflect ongoing goods disinflation and a temporary re-acceleration of service prices due to the early timing of Easter, which will lead to a decline in holiday-related goods. “This is expected to encourage price increases.”
Analysts at Deutsche Bank predict that the early timing of Easter will cause holiday package prices to rise 10% month-on-month in March, while European airfares will rise 4% annually in March and fall 8% in April. are doing.
Nevertheless, national inflation figures released this week suggested that overall price pressures were still less elevated than expected in March.
Spain's inflation rate in March fell short of the 3.2% rise expected by economists, despite government subsidy cuts that boosted electricity and fuel prices. France's inflation rate slowed from 3.2% to 2.4%. In Italy, the inflation rate rose from 0.8% to 1.3%, lower than the 1.5% expected by economists.
The ECB will decide on policy at its next meeting on April 11, but policymakers are already likely to wait until June to see if wage pressures have eased enough to cut interest rates. It suggests. If inflation slows slightly in March, as most expect, it is unlikely to persuade rate setters to change their plans. martin arnold
Did US employment slow in March?
The pace of U.S. employers' hiring is expected to slow in March, but they are unlikely to convince the Fed to cut interest rates early.
The Labor Department is expected to report on Friday that the United States added 200,000 jobs in March, according to a Reuters poll of economists. This is a decrease from the 275,000 increase in February. The unemployment rate is expected to remain unchanged at 3.9%.
Growth in February and March still shows that the labor market remains strong. The stable unemployment rate also suggests that the numbers are unlikely to persuade the Fed to cut rates sooner or faster than current expectations of three cuts this year starting this summer.
However, Ian Lingen, head of U.S. rates strategy at BMO Capital Markets, said continued weakness in the coming months could provide evidence for future rate cuts.
“While modest in weakness…'' the jobs report could prompt the Fed to cut interest rates by June, indicating that the risk of a sharp rise in unemployment continues to provide potential stimulus for policy acceleration. “The house is very aware of this,” he said. Kate Duguid
Will Chinese business confidence start to rise?
Investors will be keeping an eye on Chinese business confidence surveys for signs that depressed sentiment is starting to recover.
Caixin is scheduled to release the Services Purchasing Managers Business Index for March on Wednesday. In recent months, Caixin's PMI has outperformed the National Bureau of Statistics' official PMI, which is larger and focuses on state-owned enterprises.
Notably, the Caixin Services PMI has expanded (meaning a number above 50) every month since December 2022, when China ended its long-standing zero-corona policy. It signals signs of recovery in the moribund economy, with restaurants, movie theaters and shopping malls fully reopening after years of intermittent lockdowns.
“A strong start to the year in industrial data also raises the possibility of an upside surprise,” ING analysts wrote in a recent note. Still, one more month of expansion is unlikely to trigger an influx of capital into China's sluggish stock market or significantly change sluggish business and consumer sentiment.
An even bigger problem is that China's current plan to meet its 5% growth target for 2024 remains heavily dependent on exports rather than stimulating domestic consumption.
But China's economy is now so large, and political opposition to some of its exports so strong abroad, it is unclear whether there will be enough external demand to pull Asia's largest economy out of deflation. william sandland
