According to a recent poll conducted by the Canadian Economic Press, the consensus forecast is calling for downward revisions to the GDP projections for both 2008 and 2009, with midpoint estimates ranging from 1.2% to 1.4% for this year (down from 1.8% in June), and a range of 1.0% to 1.3% for '09 (down from 1.4%).

Meanwhile, inflation projections are expected to be revised up. Economists and strategists are predicting a midpoint range of between 3.4% and 3.6% for this year (from 3.4% in June), and a midpoint variance of between 2.4% and 2.5% for 2009 (from June's 2.4% midpoint figure).

ING Wholesale Banking economist Peter Vanden Houte is forecasting growth projections to be revised down to 1.5% in '08 and to 1.3% in the following year. However, he did acknowledge that his expectations were higher than the average.

"Although the ECB acknowledges that the second quarter was much weaker than anticipated and that the second half of the year might still be rather weak, they still qualify the current downturn as a temporary hump and they think that, by the end of this year, the economy will accelerate again," Vanden Houte said. "This is the reason why I do not think that they will downgrade that much their growth forecasts for 2009 as the markets might think."

Regarding inflation, Vanden Houte conceded that there would likely be a slight upward revision and pencilled in a projection of 3.5% for 2008 and 2.5% for 2009.

"When the ECB made its last forecasts back in June, oil prices had already risen, but not to the levels in the course of July and August," Vanden Houte said. "Admittedly, since then, oil prices came back down, the euro weakened a bit. Therefore, with the higher than anticipated figure over the last two months, one might see a small upward revision."

While expecting a downward revision to the June growth projection, 1.8% to 1.4% for 2008 and 1.5% to 1.2% for '09, Danske Bank economists anticipate that ECB President Jean-Claude Trichet will note deteriorating economic growth, "likely using the same wording as in the June statement that 'downside risks prevail.'"

"However, we expect him to be careful not to sound too dovish, to avoid fuelling expectations of rate cuts," the economists said in a research note.

In a note to clients, economists at Barclays Capital are anticipating both downside revisions to growth and upside revisions to CPI projections.

"We look for sizeable downgrades to the staff projections for real GDP growth, taking the mid-point for real GDP growth this year from 1.8% to 1.4%, and for 2009 from 1.5% to 1.0%, while we look for slight upward revisions to the HICP inflation projections, for this year from 3.4% to 3.6%, and for 2009 from 2.4% to 2.5%," the note elaborated.

"That said, we expect the Council to continue to persist with its assessment that there are upside risks to price stability, that the risks around these revised projections are on the upside for inflation and on the downside for activity."

By Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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