Eurozone next week: GDP and inflation - Danske Bank

Analysts from Danske Bank expect another strong eurozone GDP reading for Q4 17, due to be released on Tuesday.

Key Quotes: 

“In the euro area, the GDP growth figures for Q4 17 are due for release on Tuesday. Growth was strong in the first three quarters of 2017, with the latest print for Q3 at 0.7% q/q. Both survey and activity indicators have pointed towards continued strong growth. Composite PMI averaged 57.2 in Q4 (up from 56.0 in Q3), unemployment has edged below 9% and industrial production has showed further expansion. Thus, we believe Q4 GDP growth will be reported as 0.6% q/q.

“On Wednesday, we expect HICP figures for January. Headline inflation has plateaued around 1.4-1.5% y/y in recent months but we expect it to fall temporarily to 1.1% in January due to energy price base effects but bounce back to the 1.4% level shortly after. However, we do not believe headline inflation will pick up significantly from 1.4% before 2019 despite higher expected energy price inflation. Wage growth remains subdued, so underlying inflation pressure is not strong enough to lift headline inflation towards the ECB’s 2% target just yet. Still, growth momentum is high enough to sustain core inflation above 1%, which we believe will be key for ECB if it ends the QE programme. We expect core inflation to be 1.0% in January.”