ECB: Wunsch Remarks To HB Consistent With Comments To MNI

The latest Redbook Retail Sales Index showed 4.9% Y/Y growth in the last week of May (to May 31), a slowdown from 6.1% the prior week but still keeping total monthly sales at 5.5% Y/Y (vs retailers' 5.4% targeted gain). This is the first Redbook report in a while to refer to tariffs, and it earns a mention on the inflationary side: "Due to tariffs, some retailers have selectively increased prices on their products. A few retailers have lowered their profit outlooks and withdrawn their full-year guidance." 

• Redbook also notes looking forward that "seasonal demand is expected to drive business through June", with a preliminary growth target of 5.2%, though "it is likely to moderate in July, which is a transitional month leading up to the fall restocking and back-to-school periods".
• Separately, the Chicago Fed's CARTS estimate of retail sales ex-autos growth in May is 0.4% M/M SA (vs 0.10% in the "official" series for April).
• While both of these series are in nominal terms (which is no different from the official Census Bureau series), there is no evidence in the data to suggest a slowdown in national retail sales in May. Indeed the CARTS report points to a 0.4% inflation-adjusted rise in retail sales ex-autos.
• There aren't yet estimates for the May Census Bureau release which is out on June 17.

Core global FI markets trade away from session highs, several factors seemingly combine to “explain” the move.

• An uptick in crude oil, although the move is quite modest.
• The previously detailed BTP syndication, although this wasn’t a particular surprise, as some sell-side desks had flagged the potential for such issuance this week (MNI pencil in a EUR7-10bln transaction size for the new 5-year).
• Pricing of EUR IG bond issuance.
• We are on the lookout for any block flow.
• Tsy yields now flat to incrementally higher on the day, gilts continue to outperform.

This update includes additional sell-side views recieved over the last day.

The ECB’s June macroeconomic projections will be key in shaping the initial market reaction to Thursday’s policy statement. The statement will likely re-iterate the exceptionally uncertain outlook and the bank’s data-dependent stance, but a weak set of GDP/inflation projections could underscore the Governing Council’s dovish bias heading into H2. See below for a table of analyst expectations for the June projections.

• Real GDP: The main downward growth impact from US tariffs and associated uncertainty is expected in 2026, as the stronger-than-expected Q1 ’25 GDP print provides some offset this year. In 2027, some analysts pencil in upward revisions to account for higher EU/German fiscal spending.
  • RBC and Commerzbank look for a one-tenth downward revision in 2025 to 0.8%, while Natixis and Nomura see a two tenth upward revision to 1.1%.
  • The range of projections for 2026 is 0.9-1.2%.
  • In 2027, SEB and UBS expect a 1.5% projection on a larger fiscal impulse.
• Headline inflation:  The median analyst expects a two tenth downward revision in 2025 on weaker energy prices and a stronger EUR. The weaker growth expectations in 2026 also feed into lower headline inflation in that year.
  • Four analysts see a three tenth downward revision in 2025 to 2.0%, while Natixis only see a one tenth decline to 2.2%.
  • Several analysts see 2026 inflation revised two tenths lower to 1.7%. A reminder that the MNI Policy Team’s latest sources piece noted that this projection is likely to be either 1.7% or 1.8%.
• Core inflation: The median analyst expects a one tenth downward revision in 2026 relative to March, a small upward revision in 2025 and no change in 2027.
  • The anticipated upward revision in 2025 is due to higher-than-expected spot core inflation pressures since March.
  • Goldman and UBS expect a 1.8% reading in 2026, but a good number of analysts also see a one tenth upward revision to 2.0%. Nomura see a 2.1% projection for 2026.
• A reminder that the ECB will also present a scenario analysis in the June projection round, but it is unclear whether this will feature an alternative set of GDP/inflation projections.
• Note: The June macroeconomic projections are compiled by Eurosystem (i.e. National Central Bank) staff, while March was compiled by ECB staff.