Inflation surged and growth continued to accelerate in the euro zone, a plethora of indicators showed on Friday, keeping pressure on the European Central Bank to start dialling back its lavish stimulus measures as early as June. David Pollard reports.
It was a small increase but still a big surprise. A 0.1 per cent mark up in German retail sales for March where a drop was expected. And there was a even bigger surprise - as euro zone inflation rebounded from 1.5 per cent to 1.9 per cent, according to the first estimates for April. Exactly in line with the ECB target rate. (SOUNDBITE) (English) ECB PRESIDENT, MARIO DRAGHI, SAYING: "The risks of deflation have virtually disappeared." The new numbers may vindicate Mario Draghi's more upbeat outlook at his policy meeting on Thursday. If at the same time raise questions over the overall policy stance.... The ECB's massive stimulus programme kept on hold. SOUNDBITE) (English) ECB PRESIDENT, MARIO DRAGHI, SAYING: "A very substantial degree of monetary accommodation is still needed ....." Some analysts, though, share that caution. Core inflation - which strips out fuel and food prices - is still lagging. And on the political front, risks ... As France waits to see if the market-friendly Emmanuel Macron wins as president in next weekend's vote. (SOUNDBITE) (English) INDEPENDENT MARKET ANALYST, JEREMY BATSTONE-CARR, SAYING: "The expectation is that Macron will win handily. But will he? There is some uncertainty, particularly if you look at the euro ... that perhaps it's not completely cut and dried." Germany too still raises some questions. (SOUNDBITE) (English) INDEPENDENT MARKET ANALYST, JEREMY BATSTONE-CARR, SAYING: "Over the next few months we could see some weakness in, for example, industrial production, which has been extremely strong ... My sense is that it's too early to describe the German economy as firing on all cylinders." But new growth numbers from France, Spain and Austria all point to a positive rebound. Putting pressure on Draghi for even more clarity in his policy stance when the ECB meets in June.