Intesa Sanpaolo : Eurozone : growth in the first half of the year will likely prove better than expected.
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Weekly Economic Monitor – 14. April 2023
Intesa Sanpaolo – Research Department
Eurozone : growth in the first half of the year will likely prove better than expected. Both hard and surveys suggest that economic activity between Q1 and Q1 2023 may prove stronger than forecast. So far, the recent financial tensions do not seem to have affected households and business sentiment, and the impact on financial and lending conditions appears to be limited overall. However, uncertainty is greater when looking ahead to H2 2023, when monetary tightening will likely weigh on growth.
United States – The FOMC Minutes and the data leave the door open for a May rate hike, but uncertainty reigns supreme. The minutes of the FOMC meeting held in March confirm the split within the Committee on both the risks to the scenario and on concerns tied to increased uncertainty in the wake of the banking crisis. Consensus for the 25bps hike gelled moving from two opposite alternatives, considered by two groups of participants (rates unchanged or 50bps hike), and was reached balancing the need to keep fighting inflation and the need to assess the fallout of the banking crisis. At the next meeting, uncertainty will still be high, with a bias for one final hike. However, as was the case in March, in May as well the decision will remain uncertain until the last minute and will be taken after an extended debate.
The week’s market movers
In the week, the first round of April confidence surveys will be released in the Eurozone: the German ZEW, the French INSEE indices, as well as flash PMIs and consumer confidence in the euro area as a whole, that will likely confirm that economic activity is improving. Also due in the Eurozone final March inflation estimates, not expected to bring surprises, construction output, forecast to increase for the second month, and international trade data in February. The second reading of Italian inflation should also confirm the flash estimate.
In the United States , the first round of April sector surveys are due for release next week, and should show weakness in the manufacturing sector and moderate growth in services. Existing home sales and housing starts in March are forecast roughly stable.
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