MNI 5 THINGS: Energy, Food, Easter To Impact On April EMU HICP

--EMU April Flash HICP Released Thurs, Seen Up 1.4% On Year

     LONDON (MNI) - Thursday will show whether eurozone inflation picked up pace

over April, as Eurostat publishes the flash preliminary estimate for April in

the euro area.

     Ahead of the release, we outline five themes for particular attention. 

     Analysts Unconvincing April Track Record 

     Analysts generally have a mixed record at predicting inflation in April,

overestimating the figure virtually the same number of times as underestimating

it (shown in in figure 1 below). The market consensus forecast has correctly

predicted the April result on only four occasions since 2003, generally missing

by at most a tenth of a percentage point (ignoring the big surprise in 2013).

The MNI median analyst forecasts suggest headline inflation will rise to 1.4% in

April, up 0.1pp from 1.3% in March, while its core counterpart is anticipated to

fall by the same margin to 0.9%.

     Oil likely to push up headline inflation. 

     Oil prices rose 7% between March and April, with per-barrel Brent above the

USD70-mark, and will have supported overall HICP. Regional data from both Italy

and Germany highlighted an increase in energy inflation. The ECB uses the path

implied by oil futures to determine future energy prices and so with this path

shifting up since the last forecast in March, it is likely to play on their

minds more prominently. Alongside energy, food prices are also expected to

provide upward inflationary influence in April, both to be stripped out in the

core inflation measure.     

     Easter base effect to impact this April. 

     Easter Sunday fell later in April last year (April 16) compared to this

year (April 1). Consequently, prices of Easter-sensitive goods and services like

transport and package holidays will have been compared to a higher base,

weighing down on the inflation rate and offsetting the upward pressures

mentioned above. This effect will be more pronounced in the core inflation

measure, with core services (like transport, package holidays or any other

tourism based service) likely to show a drag compared to last year. This effect

will likely prove temporary however, with a rebound usually witnessed the

following month. 

     German inflation mirrored EMU expectations. 

     Germany's inflation data on Monday illustrated two things. Whilst, package

holidays, as anticipated, fell sharply on the month, leading to a fall in the

core rate, food and energy inflation increases meant that HICP inflation only

fell slightly to 1.4% in April from 1.5% in March. 

     Headline Inflation downside risk. 

     Looking at all the regional data, analyst expectations for a rise in

headline inflation to 1.4% may exhibit some downside risk. Spain showed a softer

annual HICP rate as did Italy, where annual inflation fell from 0.8% last month

to 0.5% (see table 1 below).  However, analysts' call of a moderation in core

inflation seems to hold up better with Germany, France and Spain all witnessing

a fall in the core rate. 

     Table 1: 'Big four' breakdown

HICP (% y/y)   March  April (flash)

-----------------------------------

Germany          1.5            1.4

France           1.8            1.7

Italy            0.9            0.6

Spain            1.3            1.1

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com