April industrial production, unemployment, household spending and consumer prices have been released. Both unemployment and household spending were much weaker than expected while industrial production confirmed the slowdown in industrial activity in recent months. Overall the figures suggest that growth will slow significantly in Q2 after strong 0.8% q/q growth in Q1. We might have to adjust our current expectation of 0.5% q/q down to 0.3% q/q as private consumption will be weaker than expected and inventories will be a drag on growth. Although inflation was better than expected, it will increase significantly in coming months.
Housing starts in April strengthened marginally to -8.7% y/y (see chart 5). Overall the recovery in housing starts has been weaker than expected and housing constructions' contribution to growth in Q2 might be less than our current expectation of 0.25%.
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