EUROPEAN DATA WRAP: UK GDP prints in-line, while Swedish CPIF remains hotter than forecast

Analysis details (15:00)

UK GDP Estimate, April

• In-line metrics which serve to provide the BoE with the necessary cover to continue tightening. A narrative that, assuming the PMIs prove correct, is unlikely to markedly change for May’s monthly and by extension Q2’s GDP data.


• GDP Estimate MM (Apr) 0.2% vs. Exp. 0.20% (Prev. -0.30%); YY (Apr) 0.5% vs. Exp. 0.50% (Prev. 0.30%)


• The as-expected return to growth in the month of April fails to offset the decline in March and is shy of the April Composite PMIs indication of “… GDP rising at a robust quarterly rate of 0.4%”, albeit Pantheon reminds us this is perhaps due to the weak Construction sector's absence from such surveys. Construction fell 0.6% in April (prev. +0.2%).


• Notably, the Services sector saw marked growth of some 0.3% for the month. However, as with the headline, this does not entirely offset the 0.5% decline in March; nonetheless, ONS highlights Services as the main contributor to the month’s growth.


• For May, the figure is likely to be impacted by the numerous Bank Holidays which featured one more than usual for the King’s Coronation. In reference to May, the S&P Global PMIs wrote “The surveys are consistent with GDP rising 0.4% in the second quarter after a 0.1% rise in the first quarter” and for the BoE added that the results are “nothing but hawkish”.

Swedish CPIF, May

• While the Riksbank’s preferred measure fell from the prior YY level, it printed above both the market and Riksbank’s forecast. Therefore, a 25bp hike and guidance towards further tightening to bring inflation to target and address recent SEK pressure should be expected in June.


• CPIF YY (May) 6.7% vs Exp. 6.7% (Prev. 7.6%); MM (May) 0.1% vs Exp. -0.1% (Prev. 0.2%)


• CPIF-XE YY (May) 8.2% vs. Exp. 7.80% (Prev. 8.40%); MM (May) 0.7% vs. Exp. 0.40% (Prev. 0.40%)


• CPI YY (May) 9.7% vs Exp. 9.4% (Prev. 10.5%); MM (May) 0.3% vs Exp. 0.0% (Prev. 0.5%)


• Encouragingly, food and energy prices continued to ease in the month. However, Statistics Sweden (SCB) highlights that prices “increased for a broad set of goods and services, for instance hotel and restaurant visits, recreational services, and clothing.”. Worryingly, particularly as markets expect further Riksbank tightening, CPI inflation was spurred by elevated interest expenses for owner-occupied and tenant apartments alongside rented and co-operative housing. Note, since the inflation report was released the Swedish Finance Minister announced they are preparing incentives to increase housing construction. Reminder, mortgage interest rates are omitted from the calculation of CPIF, which is the Riksbank’s preferred measure.


• Overall, the release justifies further policy action by the Riksbank after the dovish 50bp hike in April. Given the dissent last time and guidance at that point for a peak rate of 3.65% (current 3.50%), consensus being attained around another 50bp may be a reach. Instead, the Riksbank may opt to utilise bonds as a complementary tool.

German Wholesale Prices, May

• In short, Destatis reported the “highest decrease” in the YY figure since July 2020 is a welcome update on the region’s inflation front. However, within Germany focus is very much on the performance of the economy from a growth perspective, particularly after the June ZEW seemingly indicated a third quarter of shrinking output in Q2 for the region.


• Price Index YY (May) -2.6% (Prev. -0.5%); MM (May) -1.1% (Prev. -0.4%)

14 Jun 2023 - 15:00- Fixed IncomeData- Source: Newsquawk