Set of positive news from eurozone (Daily analysis 5.03.2019)

Final PMI indexes from the eurozone are slightly better than the preliminary results. Retail sales rebound after the terrible December in the single currency. According to the CASE study, the VAT gap in Poland has halved over the year, with values close to those of Finland and Denmark. The zloty remains stable, and the euro costs 4.30 PLN.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

• 4:00 p.m.: ISM index from US service sector (estimates: 57.4 pts).

Market is less worried about eurozone

Looking at the main currency pair quotations, not much has happened in the last hours. The EUR/USD exchange rate remains close to the middle of the 1.13-1.1350 range. The Chinese yuan also stayed stable, neutrally perceiving the parliament's announcement regarding (NPC) tax cuts, the possibility of increasing monetary stimulation or a slight reduction in the economic growth target for this year (in the 6.0-6.5 per cent range).

The final PMI data from the eurozone were slightly better than previously expected. Taking into account the final readings from the services sector, PMI composite amounted to 51.9 points (initial readings were 51.4 points), resulting in slightly better data than in January. As a result, according to IHS Markit estimates, GDP in the Q1 could increase by 0.2% quarter-on-quarter, although January data indicated a growth close to 0.1% quarter-on-quarter.

Slightly optimistic may be received the retail sales data from the single currency area. In year-on-year terms, sales in January amounted to 2.2% after the terrible December, where the reading was only 0.3% year-on-year. Eurostat publishes not all product categories in preliminary readings, but it is worth noting that it clearly reflected online sales (7.2% year-on-year increase close to the multi-month trend). In December, this category grew by only 0.5% year-on-year, which was particularly worrying given the general migration of sales to the internet.

As a result, data from the eurozone can be assessed rather positively, although there is little chance that two days before the publication of the results of the ECB meeting they have already changed anything in the statement from the central bank. Therefore, a dovish statement is still expected, which may hamper the generation of growth in the single currency over the coming months, even if the economic situation improves.

In the afternoon, ISM data from outside the US industry will be published. Analysts' estimates that the index will be around 57 points may be too optimistic, taking into account Friday's data from industry (54.2 points). It seems, however, that the publication would have to be really weak (below 55 points) to have a clear impact on the dollar and the main currency pair. Therefore, the EUR/USD quotations in the following hours should be relatively calm.

Positive data from Poland

Although the VAT gap is rarely covered in our analyses, it is worth noting the good news that arrived before midday. According to CASE estimates (e.g. preparing VAT calculations for the European Commission), the VAT gap in Poland fell from 36.9 billion PLN in 2016 to 13.8 billion PLN in 2018.

Another index very well illustrates this huge decrease between potential and actual tax receipts. Now the gap is only 7.2% of potential revenue. Looking at the estimates of this gap in other countries (e.g. in "Study and Reports on the VAT Gap in the EU-28 Member States"), Poland recorded a huge decrease, and now it is probably below the VAT gap in Denmark, and at the level of Finland or Austria. In 2016, according to the same study, the gap in Poland exceeded 20% of the potential revenue from this tax and was twice as big as the median (about 10%). Now it is probably clearly below this limit.

In an interview for Forsal.pl, the CASE's Scientific Director for Fiscal Policy stated that "such a rapid decline in the gap has not been observed in any other EU country in recent years". Apart from this good information, whose impact on the zloty in the short term is very small, the situation of the zloty has not changed significantly in recent hours. One euro costs still around 4.30 PLN and the situation around the zloty will probably remain calm until the end of Tuesday's session.