Company Notes Digest 4.27.17

Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

Optimism continues to run high even though the hard data isn’t reflecting it yet. It’s very likely that the hard data will eventually follow the optimism, but remember that securities prices are forward looking, so by the time hard data shows up, markets may already be on to the next thing.

The Macro Outlook:

Companies love tax reform

“at the highest level, we’re a big supporter of tax reform. It’s going to drive jobs. It’s going to drive the U.S. economy, broadly speaking. And it’s going to allow us to compete in any, whether – doesn’t matter what industry you’re in. If you’re a global company, it’s going to allow you to compete on a global platform.” —Boeing CFO Gregory Smith (Aerospace)

It’s driving a lot of optimism, but the real impact wont come until 2018

“We believe business optimism, which may be contributing to elevated quoting and ordering activity in North America, is partially a reflection of the benefits of pro-business policy in regards to infrastructure and tax reform. However, we don’t expect to see any meaningful impact from these changes until 2018.” —Caterpillar CFO Bradley Halverson (Construction Equipment)

GDP growth was actually quite low in Q1

“You had a fairly anemic GDP growth rate this first quarter. The projections are for great improvement coming up and we hope that’s the case.” —Robert Half CEO Harold Messmer (Temp Staffing)

April may have been a little slow too

“April frankly is slowing a little bit. I don’t know what that means.” —Procter & Gamble CFO Jon Moeller (Consumer Packaged Goods)

But the data should follow the optimism eventually

“you read almost every day and you see in the press virtually every day…the gap between hard data and soft data, sentiment optimism on the one hand and actual levels of activity on the other. But the good news for us …our people are moderately more optimistic. And so they’ve actually seen some signs of improvement at least for 1 month” —Robert Half CEO Harold Messmer (Temp Staffing)

There is room for inventories to grow

“without a doubt, the inventory levels, as you mentioned, are extremely low. Our sheet products are about 1.8 months on hand. I can’t — frankly, I can’t remember the last time they were that low…I guess, part of it has been that the service center industries have been waiting to make sure that what they’re seeing today…wasn’t one of those short pops.” —Nucor CEO John Ferriola (Steel)

Might that lead to inflation?

It’s a tight labor market

“So now for the U.S. specifically, I would say that, it’s a tight labor market. So we are seeing some wage inflation.” —Manpower CEO Jonas Prising (Temp Staffing)

Raw material prices have inflated

“We are experiencing raw material inflation at higher levels than we expected in January” —Whirlpool COO Marc Bitzer (Appliances)

International:

The Euro area economy is increasingly solid

“Incoming data since our meeting in early March confirm that the cyclical recovery of the euro area economy is becoming increasingly solid and that downside risks have further diminished.” —ECB President Mario Draghi (Central Bank)

Chinese consumption has picked back up after Xi’s anti-corruption drive

“The suppression of the VIP market was something that was the result organically of a process that the administration of President Xi Jinping thought was appropriate for the country, the elimination of corruption. And it had secondary effects on high-end products like shopping, and automobiles, and gaming was part of that. But having made a corrective move in China there comes a point when the corrective move, it sort of finishes. And although corruption is still a major item in the PRC, the initial impact has softened, because so much of the work that they thought had to be done, was done. And so people begin to return to normal spending habits, and they are not so strongly influenced by public policy issues that involve public officials. So the people are settling back into routines that they’re comfortable with, and that includes going to Macau and buying a new car or shopping at Louis Vuitton” —Wynn CEO Steve Wynn (Casinos)

The UK market is showing softness

“we’d note that, the UK market is getting a little bit soft during the numbers of areas. And I think, we’re starting to see our clients react to that and especially the bigger clients that we have.” —Manpower CEO Jonas Prising (Temp Staffing)

Financials:

Capital One saw a slight uptick in credit card charge offs

“Based on portfolio dynamics and industry conditions we observed in the first quarter, we now expect that the full-year Domestic Card charge-off rate will be in the high 4%s to around 5%, with quarterly variability. That is up from our prior expectation of the mid 4%s.” —Capital One CEO Richard Fairbank (Bank)

M&A activity is solid in middle markets

“Last year, I said we might experience an increase in middle market activity particularly with the sale of private businesses. In fact the number of global market completions was up 13% year-over-year for transactions size between $500 million and $2 billion and the number of announcements was up 25%. And we are benefiting from this activity” —Moelis & Co CEO Ken Moelis (Investment Bank)

Consumer:

Consumers actually expose themselves to fewer brands online

“From an assortment standpoint, if you actually look at shopping behavior, a typical shopper exposes themselves to a lower, smaller assortment online than they do offline. When they go to the store, they’re exposed to what’s ever there. Very few shoppers click through to the third or fourth page of a search, and what typically shows up on the first page of a search are the more popular offerings, the larger offerings. And then there are tools, whether it’s subscription or other tools that allow us to increase the loyalty of those consumers to our brands.” —Procter & Gamble CFO Jon Moeller (Consumer Packaged Goods)

Industrials:

Airline traffic is strong

“we’re continuing to see strong passenger traffic growth in particular. It’s only one quarter, but 8.8% passenger growth in the first quarter this year, again just speaks to the fundamental strength of the marketplace” —Boeing CEO Dennis Muilenburg (Aerospace)

Auto production is leveling out

“As we think about some of the headwinds, we think that auto production is clearly flattening out, and we think for the rest of the year relatively flat.” —CSX CFO Fredrik Eliasson (Railroad)

Defense contractors are counting on a new appropriations bill

“At this time, government spending remains limited by the continuing resolution that is set to expire on April 28…Discussions are underway to extend the CR as Congress continues to debate the regular appropriations bills. We are hopeful that these discussions result in an approved FY 2017 Defense Appropriations Act” —Lockheed Martin CEO Marillyn Hewson (Defense)

Materials, Energy:

There’s been underinvestment in energy exploration

“we are heading towards a third year of significant underinvestment, which increases the likelihood of a medium-term supply deficit as produced reserves are not replaced in sufficient volume…The current level of underinvestments is most visible in exploration, where the record-low investments, including both drilling and seismic, led to a total amount of industry discoveries of less than 5 billion barrels in 2016 versus a produced volume of over 30 billion barrels, dropping the industry-wide reserves-to-replacement ratio to 32%.” —Schlumberger CEO Paal Kibsgaard (Oil & Gas)

Miscellaneous Nuggets of Wisdom:

There is an informational advantage that comes with size

“There’s also an information advantage that comes with size…We’re basically in the intellectual capital production business. Assuming that our people are equally as smart as the best qualified investors in the world but have a more informed view, then logically, we should be able to produce better results. As Blackstone grows larger, our access to information increases and our returns benefit…This ability to generate and evaluate information is a key structural advantage at Blackstone.” —Blackstone CEO Steve Schwarzman (Asset Management)

Full transcripts can be found at www.seekingalpha.com

Capital One 1Q17 Earnings Call Notes

Richard D. Fairbank – Capital One Financial Corp.

Domestic card charge off rate higher than expected

“Based on portfolio dynamics and industry conditions we observed in the first quarter, we now expect that the full-year Domestic Card charge-off rate will be in the high 4%s to around 5%, with quarterly variability. That is up from our prior expectation of the mid 4%s. With the benefit of more data, we have refined the expected shape and timing of credit losses on our front book programs booked over the last few years.”

Increasing competitive intensity in the industry

“Over the past year and a half, we have seen increasing competitive intensity, a growing supply of credit and rising consumer indebtedness. As we move through 2016, we tightened our underwriting around the edges. Our actions over the past four quarters have led to a deceleration of our growth, just as the industry is accelerating. We still think there is a growth window, but the window is gradually becoming smaller.”

A lot of supply out there

“Yeah, Don. So you probably heard us for, I would guess, four – this is like the fifth quarter now that we have been talking pretty vocally about supply out there in the marketplace. And the last few quarters we have pointed out the pretty striking growth rate of subprime itself. I don’t have the number right in front of me, but I believe it’s 14% year-over-year subprime growth for an industry that’s growing at half that overall. Now, again, Don, that’s off of – and I really want to stress this – it’s off a much lower base that retracted significantly after the Great Recession. But still, that certainly has our attention, that subprime growth.”

Card delinquencies are more telling than auto delinquencies

“Yeah, well, the first thing I want to say is that card delinquencies are a lot more telling than auto delinquencies. And so that’s point number one. So whenever you – I always just take as one part of a lot of pieces of information when you’re looking at auto what’s happening to delinquencies because the way that people pay, and, frankly, really what happens is they wait. A lot of people wait until the moment before a car would be repossessed. And then the key thing is the payment rate at that point. And that’s a lot more telling than the delinquency patterns that precede that. So that’s just more of a general observation. Whereas in the card business, delinquencies tend to just march on their way to charge-offs in fairly predictable ways.”

The Boeing (BA) Q1 2017

Dennis A. Muilenburg – President and CEO

Airline activity is picking up. 

“…we still see solid airline profitability and strong passenger traffic that continues to outpace global GDP. According to the International Air Transport Association, the 8.8% year to date passenger traffic growth adjusted for the leap year is well above the long-term average of 5.5%. And with the recovery in global trade, we are now seeing modest improvements in cargo traffic.These favorable industry trends, combined with our robust backlog of more than 5,700 aircraft, underpin our planned production rate increases over the remainder of this decade.”

Passenger traffic picking up

“…we’re continuing to see strong passenger traffic growth in particular. It’s only one quarter, but 8.8% passenger growth in the first quarter this year, again just speaks to the fundamental strength of the marketplace.”

On defense spending

“…we’re seeing a flat to moderately up top line on the defense business over the next five years. Some of this is dependent on where we end up on the U.S. defense budget. As you know, we’re still under sequestration. It’s the law of the land, and we’re hopeful and there’s some signs that alternatives to sequestration are going to come through as the new baseline…. what we’re hearing from our customers and what we’re seeing from the new administration and from the Hill are encouraging signs in terms of adding robustness to the defense budget and selectively growing

Gregory D. Smith – CFO

On tax reform

“….we don’t have any cash offshore, other than cash that supports our operations. So we’re not in a situation where repatriation is an issue or a priority. Broadly speaking, we’re a supporter of tax reform. And simplifying the tax code, as well as getting the rate to a point of being able to compete on a global scale, is certainly something that we support. And again, we’re looking for efficiency in the tax system as well as the rate….But at the highest level, we’re a big supporter of tax reform. It’s going to drive jobs. It’s going to drive the U.S. economy, broadly speaking. And it’s going to allow us to compete in any, whether – doesn’t matter what industry you’re in. If you’re a global company, it’s going to allow you to compete on a global platform.”

Whirlpool (WHR) Q1 2017

Marc Robert Bitzer – president and chief operating officer

Currency movements and inflation were a drag on margins

“We also expanded margins through cost productivity and unit volume growth, despite $40 million of higher raw material inflation and about $10 million of unfavorable currency from Mexican peso. As a result, our margins expanded by more than 70 basis points to 11.2% for the quarter..Our operating margins were negatively impacted by approximately $20 million of currency and demand impact in our UK business, consistent with our expectations…Steel prices are higher, but resins were substantially higher throughout the quarter, but started coming down in late March. So, yes, we faced some raw material increase in North America. ”

Europe was a miss…

“…we’re very pleased to have three of our four regions fully on track, probably even on the high end of the margin. Europe was a miss. There’s no questioning around this one…what is important is we strongly consider this of being a temporary nature and not structural, this is nothing and also if you look at the issues, there’s nothing structural… March, I would say we stabilized the situation and we exited the quarter with a much stronger performance compared to January, February”

..resulting in muted growth expectations.

“we now expect 0% to 2% industry growth in 2017, a slight reduction from our prior guidance. We’re expecting growth in Russia and Eastern Europe to be offset by slight weakness in Western Europe and the UK. Based on current market rates, currency weakness in the UK is now expected to be largely offset by the strengthening Russian ruble, but increased raw material inflation will have a negative impact on margins for our full year. ”

Mixed performance in Asia

“We continued to deliver strong performance in India, and demand growth in that country has remained robust. We also continued to grow volumes in China, despite an operational environment in China which continues to be challenging. Chinese industry declines continued and raw material inflation in the region was higher than expected, negatively impacting margins by approximately $20 million. We also saw an unfavorable mix in China, ”

James Peters – CFO and Executive Vice President

On Inflation and currency

“We are experiencing raw material inflation at higher levels than we expected in January…We are also seeing less impact from currency and expect the full-year impact of currency on EBIT margins to be approximately flat.”

Lockheed Martin (LMT) Q1 2017

Marillyn A. Hewson – President and CEO

They hope for increased defense spending

“At this time, government spending remains limited by the continuing resolution that is set to expire on April 28. As you know, the continuing resolution, or CR, limits funding to prior year’s levels and prohibits new programs from starting. Discussions are underway to extend the CR as Congress continues to debate the regular appropriations bills. We are hopeful that these discussions result in an approved FY 2017 Defense Appropriations Act as we feel a further lack of budget clarity could have longer-term consequences for our armed forces and our industry..”

…and the hope seems justified

“There are however, several encouraging indications that our nation’s leaders are aligned with the need for a focus on defense spending. First, the House recently passed the FY 2017 appropriations bill, and it is currently residing with the Senate. This bill…supports vital equipment procurement, with increased spending called out for BLACK HAWK helicopters, as well as additional F-35s. Similarly, we are pleased to see President Trump’s 2017 supplemental defense appropriations submission and the administration’s initial FY 2018 budget outline, or skinny budget; both request funds in excess of the Budget Control Act caps.”

 

 

Bruce L. Tanner – Executive Vice President and Chief Financial Officer

In sum

“Our first quarter performance was mixed with a couple of earnings charges detracting from strong performance elsewhere in the business. Our cash performance was strong in the quarter and we expect that performance to carry over to a higher full year outlook than we provided last quarter. We continue to provide significant cash returns to our stockholders and we’re not giving up on trying to overcome our early setbacks and making 2017 a year we can be proud of .”

Due to product lifecycle, the CR will have delayed impact

“…the work that we’re performing today was from several fiscal years ago. It takes about three years or so to go through the F-35 lifecycle from sort of the initial dollar award to the first aircraft delivery. So, as Marillyn said, I wouldn’t expect to see, especially in 2017, much of an impact, if anything, even should CR be extended.”

On the new revenue recognition standard

“…(the) revenue recognition standard that becomes effective January 1, 2018…I’m starting to get insight into sort of rev rec the old way, if you will, and rev rec the new way. Our expectation and what we’ve disclosed in the Ks and the Qs is that we wouldn’t expect to see a large change relative to our sales and/or earnings even though we are going to be changing some contracts that are currently on a delivery-based or what we call units-of-delivery-based method of sales recognition to a cost-to-cost methodology. So that will have some impacts on sort of our opening balance sheet under the new rev rec approach, as well as sort of our opening backlog position, but I wouldn’t think the sort of the run rate if you will, of sales and earnings going forward would be a material difference at all and that’s sort of what I’m seeing as I look at the data so far.”

Caterpillar (CAT) Q1 2017

D. James Umpleby – CEO

In sum

”….generally weak economic conditions and commodity price volatility have made the last few years challenging and have significantly impacted the industries we serve…Quarterly sales and revenues were up for the first time since 2015… Profit per share, excluding restructuring, is twice what it was a year ago. There are encouraging signs and promising quotation activity in many of the markets we serve…there is still a great deal of geopolitical and market uncertainty, along with economic volatility around the world that continues to present risks.”

 

Bradley M. Halverson – President and CFO

On China

“Strength in China has mainly been driven by a strong execution of public-private partnership projects, particularly related to infrastructure and strong housing investment. Credit growth has remained supportive and better than we previously expected. High replacement demand and a tight used machine inventory market have also helped. While March and April are traditionally the highest months for industry opportunity in China’s peak selling season, if policy remains supportive we expect strong market conditions in China to continue at least through mid-year.”

Strong order demand in North America

“North America dealer inventory increased, but by less than a year ago. And end user demand was lower. Both contributed to the sales decline in North America. However, order activity in North America has been very strong, which has contributed to the increase in the backlog. The Middle East and Brazil remain weak..”

Increases oil and gas rigs means more demand for equipment

“The number of oil and gas rigs in service continues to increase and has more than doubled the lows that were reached last May. This has resulted in an increase in aftermarket parts demand to support the overhaul and rebuild of well servicing fleets. We are also seeing a significant increase in demand for our large reciprocating engines used for midstream gas compression applications. Demand for drilling and production application remains very low.”

Positive business sentiments…

“There are several positive sentiments. World business confidence is at a two-year high and world growth is accelerating. There are also positive indicators for North America construction demand. Many states have passed infrastructure bills. Pipeline projects that were previously stuck in permitting are now moving ahead and residential and nonresidential demand in certain parts of the U.S. remains robust. We believe business optimism, which may be contributing to elevated quoting and ordering activity in North America, is partially a reflection of the benefits of pro-business policy in regards to infrastructure and tax reform. However, we don’t expect to see any meaningful impact from these changes until 2018.”

…offset by some risks

“…there are other risks to the outlook that we believe are prudent to take into account. Outside of Asia-Pacific, retail stats for construction industries remain negative. Demand for overhauls and rebuilds in mining and oil and gas could diminish as those units go back to work. Brazil remains weak. The Middle East continues to struggle as a result of lower oil prices. Competitively, the pricing environment remains very challenging. The potential for oversupply of oil could drive volatility in the price of that commodity. And geopolitical uncertainty across the globe is elevated….there’s still a lot of uncertainty in the world. And there’s still the potential for volatility both in commodity prices and oil prices.”

 More positive outlook

“The backlog is up $2.7 billion on strong order activity in all segments. China construction equipment industry is robust with industry sales up sharply versus last year. Gas compression demand for reciprocating engines is very strong. And miners’ balance sheets are improving, and they are expecting increases to CapEx…We do believe that there may have been some restocking of dealer shelves in the first quarter. And certainly if you look at the hours of utilization of the mining equipment versus where it was at its depth, kind of middle of last year, mining equipment is being used quite a bit more extensively. And I think that you can conclude from that that it’s driving consumables of filters and fluids and other things like that as well.”

Credit Suisse Group AG (CS) Q1 2017

Tidjane Thiam – CEO

A straight capital raise as opposed to IPO

”You will remember that the capital plan we presented in 2015 included a CHF 2 billion to CHF 4 billion capital raise in 2017, which was supposed to be done for an IPO of the Swiss Bank in the second half of the year. Today, our board of directors has decided to propose a straight capital raise for rights offering of CHF 4 billion and to retain full ownership of our Swiss Bank. This will significantly strengthen our capital position. ”

 

David R. Mathers – CFO

Positive currency effects

“​If we look at the overall year-on-year moves, there was an increase of CHF 7 billion from the appreciation of the U.S. dollar and CHF 8 billion from external methodology changes..”

Heightened IPO Activity

“We saw the strongest momentum in equity underwriting, with revenues of $103 million, an increase of 129% year-on-year, reflecting a significant pickup in IPO activity and rights issuances…we played a major role in some of the largest and most high-profile IPOs, including Snap and Mother Goose.”

Uncertainty on tax and elections in Europe weigh on investors

“…concerns over the timing of the outcome of the tax reforms in the United States, combined with the uncertainty relating to the elections in Europe, have weighed on Markets segment. Client activity has been more sporadic towards the end of the first quarter with the…M&A announcements decreasing sequentially. Nonetheless, we believe the market does remain constructive for both debt and equity underwriting.”

On Brexit and location
“…like other international banks, we’re obviously looking at the options for our access to the EU 27 countries in a post-Brexit-type-world. Clearly, the political environment continues to develop, I think that’s a fair comment. And I think it is likely, but it’s a decision that the board will have to make in due course, that we will probably look to increase our clearing and transaction activity within the EU 27 sites. I think you’ve seen similar move from other banks, but we haven’t decided finally on that, where or what size. I think that fits in on some of the options we have for our cost plans, so I don’t think you should see any deviation from our cost plan.”

Procter & Gamble (PG) Q3 2017

Jon R. Moeller

In sum

“In the U.S., our largest and most profitable market, categories in which we compete, grew roughly 2% in the first half but were up less than a point in the March quarter. Several factors contributed to this dynamic including delayed tax returns, higher gas prices, bad weather, and what appears to be a drawdown of at-home inventory during the quarter….Foreign exchange created a three point headwind on third quarter earnings growth”

Challenges ahead unlikely to change

“Now looking forward, the external challenges we face: slow market growth, geopolitical and economic instability, foreign exchange impacts from a stronger U.S. dollar, rising commodity costs and retail trade transformation are all very real and aren’t likely to do meaningfully better in the near-term. ”

 

Reduced retail inventory in first quarter not systemic

“Retail inventory reductions had nearly a full point impact on third quarter organic sales growth…We think that the reduction in retail inventory levels was driven primarily by the consumer pattern that…occurred in January and February, and we have seen a rebuild of some of those inventory levels as the consumer came back a little bit more strongly in March. April frankly is slowing a little bit. I don’t know what that means. And you know, you have to realize we’re talking about pretty small changes on the margins. They have a big impact on our results in any one quarter, but it’s hard to look  at that and understand therefore what the future looks like. There’s nothing systemic that makes intellectual sense which would indicate why inventories should contract dramatically. Both retailers and ourselves still have significant out-of-stock opportunities to address. The last thing a retailer wants is a customer, once they’ve finally attracted her or him to their store, to not find the product that they want to buy….I expect that volatility to continue but I don’t see a systemic trend one way or the other.”

Increased online sales

“…organic sales grew 30% online in the quarter. It’s now 5% of our business, maybe it’s about a $3 billion business. It’s primarily focused, but not exclusively, in the U.S., China, and in Northeast Asia, particularly Korea..There has been a lot of talk though about…what happens to big brands, businesses like P&G in an e-commerce context, and is that good or bad? And we actually believe that it’s good, “

Side note: A new way to check product performance

“In deprivation testing, we ask consumers to score the product they currently use, say out of 100 points. We replace the product they’re currently using, typically a competitive product, with the product we’re testing and have consumers use it for several weeks. Then we give them back their original product and ask them to score it again. If their score of the original product has not changed appreciably after use of the new product, we’ve not made a significant difference in expectation or delight and therefore wouldn’t rate the new product as irresistibly superior. If they rate their old product significantly lower after use of the new product, we know the new product has elevated the level of performance they expect in the category.”

Twitter (TWTR) Q1 2017

Anthony Noto – Chief Operating Officer

Politics driving up user growth

“Audience growth in Q1 was driven primarily by organic growth, reflecting some seasonal strength followed by product improvements and marketing. Contributions to growth from product improvements importantly have been growing steadily for the last four quarters…There also is some evidence that we benefited from our new and resurrected users following more news and political accounts in Q1, particularly in the U.S. That’s a really positive thing..”

They expect Improved ROI to drive up advertising revenues in the near term

“the first thing I think that’s really important to understand and something that we’ll continue to benefit and talk about over the next several quarters is just the four consecutive quarters of DAU (Daily Active Users) growth with an acceleration again this quarter to 14%. That’s on a year-over-year basis. …The current revenue trends that we’re reporting reflect budget decisions based on trends in audience and pricing of 6 months to 12 months ago when we were not seeing the significant acceleration in user growth or the more than 60% year-over-year decline in cost per engagement. The good news is we’ve been out aggressively telling the story of that improved ROI. Early feedback has been positive. In fact, we signed 32 additional upfront deals since our last earnings call. While these represent a small portion of our total expected revenue, we’re seeing momentum in the number of upfront commitments signed. That said, advertisers have long allocation processes that take 6 months to 12 months to turn around, so we have a lot of work left to do.”

Live streaming to younger audiences

“…we had 800 hours of live streaming programming in Q1, up from 600 hours in Q2, and again that’s across sports, e-sports, news, and entertainment…50% of our audience in live streaming is less than 25 years old and over 50% is international.”

Jack Dorsey – CEO

What people use Twitter for.

“..we’ve seen for ten years that people go to Twitter first to see what’s going on and to see what’s happening and what people think about what’s going on and what’s happening. We want to get to a place where we’re the first place they hear of something. Twitter is the first place they hear of something. And that means that we need to get really good at connecting all the dots and all the data that we have to make sure that we’re building something that’s really relevant so that when we notify someone, it’s something that is deeply impactful to them, is relevant, and is important. And they go into an experience where they can dig even deeper and see what’s really happening.”

 

 

ECB Press Conference 27th April 2017

Mario Draghi, President of the ECB
Solid recovery…
“Incoming data since our meeting in early March confirm that the cyclical recovery of the euro area economy is becoming increasingly solid and that downside risks have further diminished. At the same time, underlying inflation pressures continue to remain subdued and have yet to show a convincing upward trend.”
…That is expected to continue
“Euro area real GDP increased by 0.5%, quarter on quarter, in the fourth quarter of 2016, following a growth rate of 0.4% in the third quarter. Incoming data, notably survey results, bolster our confidence that the ongoing economic expansion will continue to firm and broaden. The pass-through of our monetary policy measures is supporting domestic demand and facilitates the ongoing deleveraging process. The recovery in investment continues to benefit from very favourable financing conditions and improvements in corporate profitability.”
On Inflation
“Headline inflation has been recovering from the very low levels seen in 2016, largely owing to higher energy price increases. ….Looking ahead, on the basis of current futures prices for oil, headline inflation is likely to increase in April and thereafter to hover around current levels until the end of this year. However, as unutilised resources are still weighing on domestic wage and price formation, measures of underlying inflation remain low and are expected to rise only gradually over the medium term, supported by our monetary policy measures, the expected continuing economic recovery and the corresponding gradual absorption of slack.
Receding risk of trade protectionism
“One has to be very tentative in this, one thing that may have come out of the meetings is that perhaps the risk of trade protectionism may have somewhat receded.”
https://www.ecb.europa.eu/press/pressconf/2017/html/ecb.is170427.en.html