LONDON (AFX) - Euro zone data over the coming week is expected to show that inflationary pressures are easing further, providing an additional spur to the European Central Bank to cut rates once again on Thursday, economists said.
They said the ECB will be more inclined to cut rates after its next meeting on Oct 25 in light of Friday's disappointing German Ifo business sentiment data.
Inflation data next week from Germany and Italy is likely to underline this, said Dresdner Kleinwort Wasserstein economist John Shepperd.
According to the AFX median of economists' forecasts, German CPI is expected to be down 0.3 pct month-on-month while Italian CPI will only be 0.1 pct higher.
"After the last Council meeting, the ECB said that it was monitoring developments 'very closely'," he said. "The hint was that a rate cut could be imminent. With inflation improving and growth risks one-way, we expect a 25 basis point reduction in the refinancing rate on Thursday."
In light of today's German Ifo business survey, UBS Warburg economist Ed Teather now expects an ECB rate cut next week. Originally, he thought the ECB would hold off until its meeting on Nov 8. However, he said the inflation data will also be of "critical importance". Although there will be little information on the path of core inflation, Teather said headline inflation is expected to edge lower. "Eur oil prices, which averaged 24 pct less in the first half of October relative to the first half of September, should help facilitate this," he said. He added that M3 growth developments will probably be played down by the ECB and "should therefore provoke a muted market reaction." French household consumption figures for September will also be of interest; in August it increased 4.4 pct. French spending strengthened over the summer, when annual growth reached an average of 2.2 pct year-on-year in the second quarter.
Economists expect September's household consumption to fall 0.1 pct month-on-month as consumer sentiment reins back following the terrorist attacks in the US and the rise in unemployment.

Economists' forecasts for euro zone indicators due Oct 22-26

AFX CONSENSUS PREVIOUS
MONDAY OCT 22
Italy Aug industrial orders
year-on-year (pct) -3.7 -0.2

TUESDAY OCT 23
German Oct 23-26 prov CPI
month-on-month (pct) -0.3 0.0
year-on-year (pct) +2.0 +2.1

Italy Sept business confidence 93.0 96.0
Italy Oct CPI (cities) month-on-month (pct) 0.1 0.0 year-on-year (pct) +2.4 +2.6

France Sept household consumption
month-on-month (pct) -1.0 +0.7
year-on-year (pct) +4.3 +4.3

WEDNESDAY OCT 24
France Sept final CPI
month-on-month (pct) +0.2 0.0
year-on-year (pct) +1.5 +2.0

German Sept Import Prices
month-on-month (pct) -0.1 -1.2
year-on-year (pct) -3.2 -0.9

THURSDAY OCT 25
Italy Oct consumer confidence 119.5 121.0

FRIDAY OCT 26
Italy Aug retail sales
year-on-year +1.8 +1.4

Euro zone Sept M3
year-on-year (pct) +7.3 +6.7

German Sept PPI
month-on-month (pct) 0.0 -0.1
year-on-year (pct) +1.8 +2.7