July 3rd, 2011 
Emily Young 
After having surged in February mainly due to big ticket items, German industrial new orders are likely to have suffered a setback in March. However, most of the correlated climate indicators improved. Output in the German producing sector could have continued increasing in March, just like most of the correlated indicators,
The Purchasing Managers’ Indices for the manufacturing sector in Germany and in the eurozone are not expected to be revised significantly.
Given the increase in inflationary pressure, there is a possibility that the ECB could switch the “traffic lights” to amber again, thus paving the way for a further interest rate hike at the June meeting. Eurozone HICP rose again slightly in April to 2.8%, and could reach 3% by the middle of the year. These figures underestimate the current price momentum: extrapolating the last six months over the whole year, the inflation rate already stands at over 4.6 %. As the inflation projections for 2011 and 2012 will have to be revised up significantly, the ECB will therefore maintain its hawkish stance. We expect the next rate hike in June or July at the latest. Additionally, the ECB is working on a method to reduce the central bank credit provided to so-called addicted banks. Due to the escalation of the crisis in the periphery of Europe, however, the ECB is unlikely to present a solution to this problem at its next press conference.
Similar Posts:
- ECB Council: First rate hike
- German CPI inflation (April): Higher
- EMU industrial production (January): Unchanged
- Consumer credit (Jul): Downward trend continues
- Trade balance (Jun): Deficit widens further
