Daily Economic Outlook: May 19th 2015

Updated projections in the Bank of England's Inflation Report last week were on balance little changed from February, maintaining the expectation that UK inflation will hold around zero over the course of Q2 with a downside skew to the inflation projection overall. 

For April, the BRC shop price index suggests that food price discounting remained firm last month and is likely to have contained overall inflation pressures. This, alongside cuts in UK-wide water prices, should provide a significant offset from a second successive month of rising fuel pump prices and a post-Easter rebound in clothing and footwear prices. 
Lloyds Bank forecasts CPI inflation unchanged at 0.0%, although differences in weights and formulae are expected to push RPI inflation up from 0.9% in March to 1.0% in April.

In the euro area, the release of the German ZEW survey kicks off the round of survey readings for May. The recent increase in financial market volatility is likely to have weighed on the ZEW survey's financial community respondents and Lloyds Bank forecasts the economic expectations index dropping to 49.0 in May from 53.3 in April.

In the US, housing starts and building permits data for April will provide an update on the current state of the housing market. Following a weather-related slowdown earlier this year, the March data showed signs of stabilisation. This improvement to have continued into April with housing starts rising to 1018k (prev 926k) and building permits to 1071k (prev 1042k), according to Lloyds Bank.