Eurozone Growth: Will Draghi be worried? – TDS

Looking at how the ECB is likely to characterize growth, analysts at TDS think that it's almost certain to maintain that the risks to the growth outlook "remain broadly balanced."

Key Quotes

“President Draghi is likely going to have to alter the wording around the risks, as last time the main upside risk was that "the strong cyclical momentum, underpinned by continued positive developments in sentiment indicators, could lead to further positive growth surprises in the near term."

“We've in fact seen a fairly tightly-coordinated effort by the Governing Council in recent days to downplay the recent soft data and reassure investors that their policy remains on track. Comments by Couré ("not worried about euro-zone growth", 9 Apr), Praet ("weaker data no reason to change ECB's assessment", 9 Apr, and "some moderation of late, following several quarters of very strong growth", 16 Apr), and Villeroy ("recent growth data don't alter inflation outlook", 18 Apr) send a consistent message: the ECB sees the weaker data, it might have a small impact on the first quarter's growth rate, but it's nothing to get overly worried about in terms of the mediumterm inflation forecast.”

“That said, given the recent data slowdown, the ECB will no longer be able to talk about further positive growth surprises, as data surprises turned negative overall around the time of March ECB meeting. The ECB's March macroeconomic projections showed 0.7% q/q growth for 18Q1, well above our tracking of 0.4% q/q.”

“Furthermore, they will want to avoid any discussion of the implications of the weak data for the inflation outlook until staff have fully assessed the 18Q1 data (and any possible rebound in April/May data) in their June projection. So we look for something a bit more fuzzy or a bit less short-term in the wording, maybe shortening to "the strong cyclical momentum could lead to stronger growth in the second part of this year." This wording around the upside risks to growth will likely be the most important change in Draghi's prepared remarks.”