Euro area CPI likely to match flash at 0.0% y/y

On Tuesday the final release of April euro-area CPI inflation is expected to match the flash release at 0.0% y/y, confirming that the euro area moved out of deflationary territory after four months. 

Similarly, core CPI will likely match the flash at 0.6% y/y. Coupled with the highest GDP growth for seven quarters, these would be preliminary signs that the European Central Bank's measures are working. 

In the medium term, a sustained period of above-trend growth is needed to shrink spare capacity in the euro-area labour market. 

Wages are a key indicator of the amount of spare capacity. Germany shows signs of solid wage growth, but weaker countries do not, yet.