As far as Europe’s real economy is concerned, the problems on the periphery are just that, peripheral, according to Credit Suisse’s Robert Barrie.
Germany, which along with the rest of the euro zone unveils gross domestic product data later this week, is expected by Barrie to be a major outperformer with growth in the first quarter expected to top one percent and four and a half percent for 2011, data that will have the ECB thinking about when to hike.
“German exports rose almost 10 percent during the first quarter. At the other end of the scale, Greece should remain mired in recession,” said Barrie in a note to clients as S&P and Moody’s weighed into the discussion on Greece’s finances with warnings over Athens debts.
“Last week’s ECB press conference suggested that, for now, the ECB is only comfortable hiking at a fairly slow pace,” he wrote.
“But the ECB does seem to be responding — at least to some extent — to economic fundamentals. So the pace of its response may also depend on fundamentals,” said Barrie
“Euro area inflation is likely to continue to creep up, reaching a peak of just above three percent in the summer. And the hard data on growth may also strengthen”
“We think that momentum could hold up in the second quarter,” he added.