BofAML _ la inflación global no ayuda a la Zona Euro

Redacción - Viernes, 10 de Febrero

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Europe Economic Weekly: Not much help from global friends • Higher global inflation can help Euro area inflation but not enough to achieve a self-sustained path beyond the mid-year hump •  UK: Pay growth will not accelerate in our view. The BoE's latest (reliable) pay survey agrees. •  Sweden: Growth is strong but inflation below target. We expect the Riksbank to stay dovish this year.

One of the reasons why the inflation hump we have ahead could have some more legs is that inflation is a global phenomenon. Inflation moving higher elsewhere could help keep Euro area inflation higher beyond the peak in April. We look carefully at this in the main Euro area piece. Global reflation will help but not a great deal. A gradual improvement in the global output gap will generate a cumulative increase of 5bps in EA core inflation.

Meanwhile, leading indicators for the Euro area remained robust in January. The decent growth momentum looks to be maintained in 1Q. But unlike the PMIs, national surveys suggest growth momentum is no longer accelerating. Which one to trust? We argue in our weekly view that we would prefer national surveys; their track-record in GDP growth is more decent than that of PMIs. Also there, we discuss again French politics, which continue to concentrate conversations with clients. Questions continue to focus on Le Pen risks (rather than France's upside potential under alternative outcomes), notably on her flagship project to hold a referendum on EU/Euro area membership. Institutional hurdles remain in place. But we would think that under a scenario of a Le Pen victory on 7 May, markets would not attribute a lot of attention to these hurdles.

Elsewhere, the monetary job is not finished yet in Sweden: growth is strong but inflation below target. We expect the Riksbank to stay dovish. ECB QE and the Krona are important: a sharp appreciation would undo all the progress of the past few years. We expect unchanged rates and QE next week. The Riksbank is running out of assets to buy. But there are still tools left to use. Meanwhile in the UK we have seen soft data flow over the past couple of weeks for consumers and the housing market. A recent survey by BoE suggests pay growth will slow in 2017 adding further evidence that a real pay squeeze will crimp consumption and deliver our pessimistic growth forecast. A50 legislation passed the lower house of parliament: UK is on track to trigger by end-March and hard Brexit remains our base case.

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