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Daily Insight

31 March 2016

An Easter gift for the ECB

Eurozone inflation lifted by early Easter…

Inflation in Germany rose to 0.3% yoy in March, up from 0.0% in February. The jump was

stronger than expected, with the consensus forecast at 0.1%. The HICP measure rose to

+0.1% yoy in March from -0.2% yoy in February. The detailed regional data clearly show that

there was a considerable impact of the timing of Easter. The Easter holidays were in March

this year, but in April in 2015. As a result, the yoy rise in the price of services such as package

holidays and hotels and restaurants jumped sharply higher this year. We roughly estimate that

the shift in the timing of Easter had an upward impact of around 0.3-0.5 percentage points on

inflation. This suggests that excluding the impact of Easter inflation would have moved a touch

lower in March. Indeed, the detailed nationwide data show that the drop in energy price

inflation intensified in March, to -8.9% yoy from -8.5% in February, while some individual

states also reported a decline in goods price inflation.

… eurozone total to have moved back to zero or above temporarily

The early estimates for inflation in Belgium and Spain also showed rises in March. This

suggest that the eurozone total – to be published on Thursday at 11.00 CET – increased from

-0.2% yoy in February to zero or slightly above zero. That said, the upward impact on yoy

inflation of the timing of Easter will be followed by a downward impact in April that will be twice

as big. Therefore, eurozone inflation is set to fall back to levels well below zero next month.

There will then be a normalization in May, when the underlying trend will become clearer. We

think headline inflation in the eurozone will be negative over the next few months before

turning significantly positive in the second half of the year, as the drag from energy dissipates.

However, it will likely remain at levels well below the ECB’s price stability goal for the

foreseeable future, reflecting very weak core inflation.

Eurozone economic sentiment drops further

The European Commission’s economic sentiment indicator staged its third monthly decline in

a row in March, falling to 103.0, down from 103.9 in February. At its current level sentiment is

still somewhat above its long-term average value of 100 and consistent with moderate

economic growth. Indeed, we expect eurozone GDP growth to have lost some momentum in

Group EconomicsMacro & Financial MarketsResearch

Aline Schuiling

Senior Economist

Tel: +31 20 343 5606

aline.schuiling@nl.abnamro.com

• Early timing of Easter set to lift eurozone inflation …

• … but we expect it to drop back below zero in April

• Eurozone economic sentiment declined further in March

2 Daily Insight – An Easter gift for the ECB - 31 March 2016

2016Q1, but to have remained in positive territory. This was basically the picture that was also

painted by the composite PMI for March (even though that indicator rose) that was published

earlier. The detailed sentiment data show that the weakness in the first three months of this

year was broad-based, with sentiment in industry, services, construction and the retail sector,

as well as consumer sentiment all moving lower.

GDP growth and Economic Sentiment

% qoq index

Source: Thomson Reuters Datastream, ABN AMRO Group Economics

70

80

90

100

110

120

-1.0

-0.5

0.0

0.5

1.0

10 11 12 13 14 15 16

GDP (lhs) Economic sentiment (rhs)

3 Daily Insight – Further ECB easing - 22 March 2016

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Day Date Time Country Key Economic Indicators and Events Period Latest outcome Consensus ABN AMRO

Monday 28/03/2016 US PCE deflator core - % mom Feb 0.3 0.2Monday 28/03/2016 14:30:00 US PCE deflator core - % yoy Feb 1.7 1.8Monday 28/03/2016 16:00:00 US Pending home sales - % mom Feb -2.5 1.5

Tuesday 29/03/2016 01:30:00 JP Unemployment - % Feb 3.2 3.2Tuesday 29/03/2016 10:00:00 EC M3 growth - % yoy Feb 5.0 5.0Tuesday 29/03/2016 11:30:00 US Fed Williams speaks in SingaporeTuesday 29/03/2016 15:00:00 US S&P/Case Shiller house price index Jan 0.8 0.7 0.7Tuesday 29/03/2016 16:00:00 US Conference Board cons. confidence - index Mar 92.2 93.5 92

Wednesday 30/03/2016 01:50:00 JP Industrial production - % mom Feb P 3.7 -5.5Wednesday 30/03/2016 06:30:00 NL Producer confidence manufacturing - index Mar 3.1 2.9Wednesday 30/03/2016 11:00:00 EC Economic sentiment monitor - index Mar 103.8 103.6 103.5Wednesday 30/03/2016 14:00:00 DE CPI - % yoy Mar P 0.0 0.2 0.0Wednesday 30/03/2016 14:15:00 US ADP nat. employment report - thousands Mar 213.8 195.2 190

Thursday 31/03/2016 09:55:00 DE Unemployment change - thousands Mar -10.0 -5.4Thursday 31/03/2016 10:30:00 GB GDP - % qoq 4Q F 0.5 0.5Thursday 31/03/2016 11:00:00 EC Core inflation - % yoy Mar A 0.8 0.9 0.7Thursday 31/03/2016 11:00:00 EC CPI - % yoy Mar -0.2 0.0 -0.4Thursday 31/03/2016 13:00:00 CZ Repo rate - % Mar 31 0.1 0.1Thursday 31/03/2016 US Fed's Dudley speeks on Financial Crises

Friday 01/04/2016 01:50:00 JP Tankan business conditions large enterprises 1Q 12 10Friday 01/04/2016 03:00:00 CN PMI manufacturing - index (official) Mar 49.0 49.4Friday 01/04/2016 03:45:00 CN PMI manufacturing - index (HSBC) - flash Mar 48.0 48.4Friday 01/04/2016 09:00:00 NE PMI Mar 51.7 51.8Friday 01/04/2016 EC PMI manufacturing - index Mar F 51.4 51.4Friday 01/04/2016 10:30:00 GB PMI manufacturing - index Mar 50.8 51.2Friday 01/04/2016 11:00:00 EC Unemployment - % Feb 10.3 10.3 10.3Friday 01/04/2016 14:30:00 US Change in employment private employment - thousands Mar 230 196 190Friday 01/04/2016 14:30:00 US Change in employment total - thousands Mar 242 203 200Friday 01/04/2016 14:30:00 US Unemployment - % Mar 4.9 4.9 4.9Friday 01/04/2016 15:45:00 US Markit - Flash PMI Mar F 51.4Friday 01/04/2016 16:00:00 US Univ. of Michigan cons. confidence - index Mar F 90.0 90.7 90Friday 01/04/2016 16:00:00 US ISM manufacturing - index Mar 49.5 50.6 51.0Friday 01/04/2016 US Fed Mester speaks in NYFriday 01/04/2016 RU GDP - % yoy 4Q -4.1

Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected key variables and events)