EMU Economic Indicators Preview

(Week of 5 to 11 May 2008)

• German industrial new orders will probably have remained more or less unchanged in March
• Output in the German producing sector is likely to have decreased in March
• ECB set to keep refi rate unchanged

German industrial new orders might only have stabilized in March, as the correlated climate indicators sent mixed signals. However, the February figure could be revised upwards. Output in the German producing sector will probably have dropped in March, particularly because construction activities declined. French industrial production might have decreased too in March, as most of the correlated indicators deteriorated.

The German trade balance and current account are expected to have increased in March, following their usual seasonal pattern.

The ECB Council is meeting on Thursday in Athens to discuss monetary policy. Even after receding to 3.3% from 3.6%, inflation rates remain elevated. We therefore expect the ECB Council to retain its slightly hawkish undertone. However, while growth was quite robust in Q1, the economic outlook has deteriorated, according to survey data. Only recently, the EU Commission cut its 2009 GDP forecast from 2.1 to 1.5%. Moreover, financial markets remain under considerable strain. Overall, we expect the ECB council to keep rates on hold once again in May.

BHF-BANK
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