Eurozone indicators to be released in the coming week will show inflation easing in March as the effects of last year's surge in oil prices wane, while business confidence is expected to consolidate after recent strong gains.
In a heavy week for economic data, the German Ifo survey stands out as the key indicator, with economists expecting the business climate index to ease slightly from the 14-year high reached last month.
The Ifo index for March is projected to fall to 102.9 from a 14-year high of 103.3 in February. The business expectations index is seen declining to 103.8 from 104.8, but the business assessment index, which measures current conditions, is forecast to continue advancing to 102.6 from 101.9.
"While corporates may be scaling back their expectations somewhat, the assessment of current conditions probably improved further, in line with buoyant industrial orders," said Lorenzo Codogno of Bank of America.
In France business confidence is expected to have remained stable in March after lagging behind that of Germany in recent months. The March business climate indicator is likely to be unchanged at 105, with the general output expectations indicator also steady.
In Italy the ISAE business confidence index for the manufacturing sector should show a recovery in March after declining for the first time in nine months in February. Economists expect the index of edge up ti 92.5 from 92.3 last month.
The overall eurozone economic sentiment indicator is expected to edge higher again in March, continuing an upward trend that started in mid-2005. But the confidence indicator may lose momentum in the months ahead in response to rising interest rates, economists said.
Inflation in the 12-nation eurozone is expected to have eased to a provisional 2.2 percent in March from 2.3 percent in February, continuing the downward trend from the four-year peak of 2.6 percent reached in September.
The anticipated decline is attributable to slowing energy inflation and favourable base effects related to last year's sharp increase in oil prices and tobacco taxes, economists said.
In Germany the GfK market research institute's consumer climate index is projected to remain at 4.8 in April, aided by a recent recovery in retail sales. The upcoming 2006 football World Cup in Germany has also contributed to recent gains in consumer confidence
But German retail sales are expected to have eased 0.5 percent in February following the strong 1.8 percent gain in January.
"The underlying trend is encouraging and will likely continue," said Codogno of Bank of America. But Nick Matthews of Barclays Capital cautioned against reading too much into the data given the substantial and frequent revisions to the series.
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