Societe Generale’s macro team highlights that March flash PMIs will be the first key read on how the recent Oil shock is affecting Euro area activity and prices. They expect only a limited fall in the activity index but will watch price components closely, as a stronger price shock than growth hit would support the ECB’s case for early rate hikes.

PMIs to gauge growth versus inflation

"The headline of this week will be the flash March PMIs on Tuesday. For the ECB to feel comfortable delivering early hikes, it will want to see a clearly larger shock to prices than to growth. In this context, all eyes will be on the path taken by activity and prices subcomponents of PMIs."

"The brent oil price finished last week around $110 per barrel, still below its $128 peak in March 2022 as Russia invaded Ukraine. Spot prices of refined products show a different picture. Both jet fuel and diesel prices are now above their 2022 peak, and by a large margin for jet fuel."

"In March 2022, the activity index barely moved while the prices index increased, though it was already very high, an important difference with the current situation."

"We expect this time as well only a limited fall of the activity index and will watch closely what prices do."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)