The week ahead: 6 - 10 May 2024

Eurozone – German Industrial production is expected to have contracted moderately in March (-0.5%) in part because of payback for the strong increases of 2.1% m/m in February and 1.3% m/m in January. The German manufacturing sector is still in contractionary territory although shows signs of bottoming out. Last week’s GDP release showed foreign demand picking up as net exports rose on a quarterly basis. New factory orders, to be released next Tuesday are likely reflecting this as well with a modest m-o-m increase after a 0.2% m/m increase in March. Cyclical headwinds may be easing but the German industrial sector is still hampered by structural challenges, such as reduced competitiveness. Because of this industrial production is not yet set for a strong recovery and is likely to grow only moderately over the coming months. The series however is highly volatile on a monthly basis.

Eurozone retail sales are expected to show a modest recovery after a prolonged period of weakness, helped by the earlier timing of Easter.

UK – We expect the Bank of England to keep monetary policy on hold. Inflation has continued to fall but by less than expected, likely keeping most MPC members in favour of a later start to rate cuts. Our base case remains for cuts to start in August.

China – On Thursday, annual growth of exports and imports is expected to turn positive again. This partly reflects a base effect from last year, but also is in line with the bottoming out in the global industrial cycle seen over the past months.