Daily Economic Outlook: 14th July, 2015

Against the ongoing backdrop of attempts by Greece and its creditors to erect the required building blocks for their 'agreement' on a third bailout programme, several euro area data releases will provide useful insights into the Q2 growth outlook. The German ZEW has softened for three consecutive months, partly on the back of Greek-related tensions. The market consensus envisages another retreat in today's release for July. 

According to Lloyds Bank, "On the other hand, euro area industrial production is expected to strengthen for the second month in a row with a 0.3% rise in May. This would point to a continuation of the 0.4% q/q pickup in Q1 euro area growth."

Domestically, the main focus will be on the June inflation release. May saw the headline rate creep back into positive territory for the first time since January. While the ongoing strength of sterling will impart some downside inflationary pressure, this is likely to be offset by a 1% m/m rise in petrol prices and signs that the pace of price declines on the high street eased in June. Consequently, Lloyds Bank notices another 0.1% y/y gain with the core rate remaining at 0.9%. 

May's strong US 1.2% retail sales print was boosted by a sharp pickup in auto sales. Lloyds Bank expects this afternoon's release to show a weaker 0.4% reading for June this would leave the Q2 monthly average at 0.6%, compared to the 0.1% recorded in Q1, and thus chime with a solid rebound in Q2 GDP growth.