Wednesday February 22 2017
Eurozone Inflation Rate Confirmed At 1.8% In January
Eurostat | Yekaterina Guchshina | yekaterina@tradingeconomics.com

Consumer prices in the Euro Area increased 1.8 percent year-on-year in January of 2017, following a 1.1 percent rise in December and in line with preliminary estimates. It is the highest inflation rate since February of 2013, boosted by fuel and food prices. Excluding energy, food, alcohol and tobacco, core inflation remained steady at 0.9 percent. On a monthly basis, prices fell 0.8 percent.

The largest upward impacts to euro area annual inflation came from fuels for transport (0.5 percentage points), heating oil and vegetables (+0.14 pp) while gas (-0.08 pp), telecommunications (-0.09 pp) and bread and cereals (-0.05 pp) had the biggest downward impacts.

The highest annual rates were recorded in Belgium (3.1 percent), Latvia and Spain (both 2.9 percent) and Estonia (2.8 percent). By contrast, lowest annual rates were observed in Ireland (0.2 percent), Romania (0.3 percent) and Bulgaria (0.4 percent).

Core inflation which excludes energy, food, alcohol and tobacco was recorded at 0.9 percent, unchanged from the previous month. Excluding energy only, the inflation rate rose to 1.1 percent from 1 percent in the previous month.  

On a monthly basis, consumer prices fell by 0.8 percent after increasing by 0.5 percent in December. 




Thursday February 16 2017
ECB Simulus Still Needed To Support Growth And Inflation
ECB | Joana Ferreira | joana.ferreira@tradingeconomics.com

The ECB's board agreed that the recent trends of a firming economic recovery largely benefited from the current accommodative monetary policy stance and that the central bank’s stimulus was still needed to support growth and inflation, minutes from the ECB's January meeting showed. Policymakers also reiterated that the balance of risks to the economic outlook was seen as remaining on the downside and more decisive contributions from other policy areas were essential to ensure a self-sustaining recovery.

Excerpts from the Account of the monetary policy meeting of the Governing Council of the European Central Bank, held in Frankfurt am Main on Wednesday and Thursday, 18-19 January 2017:

With regard to the monetary policy stance, members widely shared the assessment provided by Mr Praet in his introduction that, while inflation had increased lately, largely owing to base effects in energy prices, underlying inflation pressures had remained subdued and signs of a convincing upward trend were still lacking. It was broadly agreed that a very substantial degree of monetary accommodation continued to be needed for euro area inflation pressures to build up and to secure a sustained return of inflation rates towards levels below, but close to, 2% over the medium term.

Members agreed on the appropriateness of the current monetary policy stance and recent developments were generally seen to vindicate the decisions taken by the Governing Council at its meeting in early December 2016. While there had been some positive news since that meeting, the fundamental picture remained largely unaltered and there was no room for complacency, as risks and uncertainties had not receded substantially, notably those related to the political environment at the global level and within the euro area. 

In this context, it was recalled that, in line with the Governing Council’s monetary policy strategy and past communication, monetary policy had to be forward-looking and oriented to the medium term, meaning that the Governing Council would look through the volatility in short-term data if judged transient and to have no implication for the medium-term outlook for price stability. Therefore, there was broad agreement to look through recent upturns in headline inflation driven by energy prices, while carefully monitoring potential indirect and second-round effects. This was seen to be fully consistent with the Governing Council’s past decisions and established approach to treating temporary changes in inflation on the upside and on the downside.

Against this background, it was widely agreed that it was imperative to maintain a very substantial degree of monetary accommodation for inflation pressures to build up and durably support headline inflation. Otherwise, recent encouraging developments in inflation expectations and the prospects for a sustained adjustment in inflation towards the Governing Council’s inflation aim could be put at risk. Therefore, the Governing Council was seen as well advised to remain patient and maintain a “steady hand” to provide stability and predictability in an environment that was still characterised by a high level of uncertainty. At the same time, the point was made that the window of opportunity provided by a prolonged period of favourable monetary and financial conditions needed to be used by other policy areas to bolster sustained growth, namely by speeding up structural reforms.




Wednesday February 15 2017
Eurozone Trade Surplus Widens In December
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Eurozone trade surplus rose to €28.1 billion in December 2016 from €24.4 billion in the same month of the previous year and above market consensus of €22.8 billion. Exports increased 6 percent to €178.6 billion while imports went up at a slower 4 percent to €150.5 billion.

Exports of goods to the rest of the world advanced 6 percent to €178.6 billion in December 2016 from €168.7 billion a year earlier; while imports increased at a slower 4 percent to €150.5 billion compared to €144.4 billion in December 2015.

Considering 2016 full year, the trade surplus widened to €273.9 billion from €238.7 billion in 2015, as exports were nearly unchanged at €2,047.8 billion while imports fell 2 percent to €1,774 billion.

Meanwhile, the European Union recorded a €20.9 billion surplus in trade in goods with the rest of the world, compared with a €20.6 billion surplus in December 2015. Exports went up 5 percent to €164.4 billion from €156.1 billion a year earlier; and imports rose 6 percent to €143.5 billion compared to €135.4 billion.

Considering 2016 full year, the European Union recorded a surplus of €39.3 billion, compared with €59.9 billion in 2015. Exports of goods dropped 2 percent to €1,745.7 billion from €1,789.2 trillion a year earlier, led by a fall in sales of energy (-13 percent) and other manufactured goods (-2 percent) while exports of food and drinks rose (2 percent). Imports shrank 1 percent to €1,706.4 billion from €1,729.2 billion, as purchases declined the most for energy (-20 percent) and raw materials (-5 percent). Among trading partners, the biggest decreases in shipments were reported for South Korea (-7 percent) and Switzerland (-5 percent); while the decline in imports mainly reflected the strong fall in purchases from Norway (-15 percent) and Russia (-13 percent). 




Tuesday February 14 2017
Eurozone Q4 GDP Growth Revised Down To 0.4%
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Eurozone economy advanced 0.4 percent on quarter in the three months to December of 2016, the same pace as in the previous period and worse than a preliminary reading of a 0.5 percent expansion, the second estimate showed. Among countries for which data is already available, GDP growth picked up in Germany and France; was unchanged in Spain; and slowed in Italy.

Among countries for which data is already available, GDP expanded at a faster pace in: Germany (0.4 percent from 0.1 percent in Q3); France (0.4 percent from 0.2 percent); Austria (0.6 percent from 0.5 percent); Belgium (0.4 percent from 0.2 percent); Latvia (0.8 percent from 0.3 percent); Lithuania (1.3 percent from 0.4 percent); and Slovakia (0.8 percent from 0.7 percent). Meanwhile GDP growth was unchanged in Spain (at 0.7 percent) and slowed in: Italy (0.2 percent from 0.3 percent in Q3); Cyprus (0.5 percent from 0.8 percent); the Netherlands (0.5 percent from 0.8 percent); and Portugal (0.6 percent from 0.8 percent).

By contrast, the Greek economy contracted 0.4 percent and the Finnish GDP fell 0.5 percent.

Compared with the same quarter of the previous year, the Euro Area economy expanded 1.7 percent, down from 1.8 percent in the previous period and worse a preliminary reading of 1.8 percent growth. 

Considering the European Union, the GDP growth was revised down to 0.5 percent quarter-on-quarter compared with a preliminary figure of 0.6 percent; and to 1.8 percent year-on-year after a flash estimate of 1.9 percent. 




Tuesday February 14 2017
Euro Area Industrial Output Growth Slows In December
Eurostat | Joana Taborda | joana.taborda@tradingeconomics.com

Industrial production in the Euro Area rose 2 percent year-on-year in December of 2016, slowing from a 3.2 percent rise in November but slightly above expectations of 1.7 percent. On a monthly basis, production fell 1.6 percent, following a 1.5 percent drop in November and worse than market expectations of a 1.5 percent decline. It is the biggest decline since September of 2012.

Year-on-year, production rose for energy (6.5 percent); durable consumer goods (3.9 percent); intermediate goods (3.4 percent) and non-durable consumer goods (0.1 percent). In contrast, production of capital goods edged down 0.1 percent.

Among Member States for which data are available, the highest increases were recorded in Latvia (11.5 percent), Slovenia (10.2 percent) and Estonia  (10 percent). Production in Italy jumped 6.6 percent and increases were also seen in France (1.4 percent) and Spain (2 percent). In contrast, industrial output in Germany fell 0.8 percent and went down 1.8 percent in Ireland. 

On a monthly basis, production in the Euro Area fell for capital goods (-3.3 percent); energy (-1.4 percent); non-durable consumer goods (-1.2 percent) and intermediate goods (-0.2 percent). In contrast, production of durable consumer goods rose by 2.9 percent. 

Among Member States for which data are available, the largest decreases were registered in Ireland (-11.7 percent) and Germany (-3.1 percent). Production also fell in france (-0.9 percent),  and Spain (-0.4 percent) but rose in italy (1.4 percent). 




Monday February 06 2017
ECB May Extend QE If Inflation Outlook Worsens
ECB | Joana Ferreira | joana.ferreira@tradingeconomics.com

Support from ECB's monetary policy is still needed if inflation rates are to converge towards the 2 percent target in a sustained manner, President Mario Draghi said at the ECON committee of the European Parliament. Draghi also noted that recent pick-ups in inflation were driven by energy prices while underlying inflation pressures remain subdued, and confirmed that the central bank is prepared to expand its record stimulus programme if the inflation outlook becomes less favourable.

Excerpts from introductory statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 6 February 2017:

At the December meeting, the Governing Council saw the need for the recovery to further mature and strengthen to ensure a sustained convergence of inflation rates towards levels below, but close to, 2% over the medium term. For this to happen, financing conditions have to remain supportive, taking remaining uncertainties inside and outside the euro area into account. We therefore decided to safeguard the amount of monetary easing for the period ahead.

Against this background, we decided to extend the asset purchase programme beyond March 2017, with the intention of conducting our purchases until the end of December 2017 or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. We will continue to purchase assets at a monthly pace of €80 billion until March. Starting from April, our net asset purchases will run at a monthly pace of €60 billion, and we will reinvest the securities purchased earlier under our programme, as they mature. This will add to our monthly net purchases.

Our December decisions strike a balance between our growing confidence that the euro area’s economic prospects are firming up, and – at the same time – the lack of a clear sign of sustained convergence of inflation rates towards the desired level.

But support from our monetary policy measures is still needed if inflation rates are to converge towards our objective with sufficient confidence and in a sustained manner. The pickup in headline inflation in December and in January largely reflects sizeable upward base effects and recent increases in energy prices. So far underlying inflation pressures remain very subdued and are expected to pick up only gradually as we go on. This lack of momentum in underlying inflation reflects largely weak domestic cost pressures. The still significant degree of labour market slack and weak productivity developments are weighing down on wage growth.

As I have argued before, our monetary policy strategy prescribes that we should not react to individual data points and short-lived increases in inflation. Our relevant policy horizon is the medium term. We therefore continue to look through changes in HICP inflation if we believe they do not durably affect the medium-term outlook for price stability.

Looking ahead, risks to the euro area outlook remain tilted to the downside and relate predominantly to global factors. Our current monetary policy stance foresees that, if the inflation outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council is prepared to increase the asset purchase programme in terms of size and/or duration.


Tuesday January 31 2017
Eurozone Unemployment Rate At Near 8-Year Low Of 9.6%
Eurostat | Joana Taborda | joana.taborda@tradingeconomics.com

The jobless rate in the Euro Area declined to 9.6 percent in December of 2016 from a downwardly revised 9.7 percent in November and below market expectations of 9.8 percent. It is the lowest unemployment rate since May of 2009. A year earlier, it was higher at 10.5 percent.

The EU28 unemployment rate was 8.2 percent in December 2016, stable compared to November 2016 and down from 9 percent in December 2015. This remains the lowest rate recorded in the EU28 since February 2009.

Eurostat estimates that 20.065 million men and women in the EU28, of whom 15.571 million were in the euro area, were unemployed in December 2016. Compared with November 2016, the number of persons unemployed decreased by 159 000 in the EU28 and by 121 000 in the euro area. Compared with December 2015, unemployment fell by 1.839 million in the EU28 and by 1.256 million in the euro area.

Among the Member States, the lowest unemployment rates in December 2016 were recorded in the Czech Republic (3.5 percent) and Germany (3.9 percent). The highest unemployment rates were observed in Greece (23.0 percent in October 2016) and Spain (18.4 percent).

Compared with a year ago, the unemployment rate in December 2016 fell in twenty-four Member States, while it increased in Cyprus (from 13.1 percent to 14.3 percent), Italy (from 11.6 percent to 12.0 percent), Estonia (from 6.6 percent to 6.7 percent between November 2015 and November 2016) and Denmark (from 6.1 percent to 6.2 percent). The largest decreases were registered in Croatia (from 15.0 percent to 11.4 percent), Spain (from 20.7 percent to 18.4 percent) and Portugal (from 12.2 percent to 10.2 percent).




Tuesday January 31 2017
Eurozone GDP Growth Beats Expectations In Q4
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Eurozone economy advanced 0.5 percent on quarter in the three months to December of 2016, following an upwardly revised 0.4 percent growth in the previous period and better than market expectations of a 0.4 percent expansion, the preliminary flash estimate showed. Among countries for which data is already available, GDP growth picked up in France, Belgium, Latvia and Lithuania and was unchanged in Spain and Austria.

Among countries for which data is already available, GDP expanded at a faster pace in: France (0.4 percent from 0.2 percent in Q3); Belgium (0.4 percent from 0.2 percent); Latvia (0.8 percent from 0.3 percent); and Lithuania (1.3 percent from 0.4 percent). Meanwhile GDP growth was unchanged in Spain (at 0.7 percent) and Austria (at 0.5 percent). Germany, the biggest economy in the Euro Area, is expected to release preliminary GDP estimates in two weeks.

Compared with the same quarter of the previous year, the Euro Area economy expanded 1.8 percent, the same as in the previous period and also better than forecasts of 1.7 percent growth. 

Over the whole year of 2016, GDP grew by 1.7 percent after expanding by 2 percent in 2015.

Considering the European Union, the GDP growth rose to 0.6 percent (+0.5 percent in Q3) quarter-on-quarter and was steady at 1.9 percent year-on-year. Considering full year of 2016, GDP grew by 1.9 percent, easing from a 2.2 expansion in 2015.


Tuesday January 31 2017
Eurozone Inflation Rate at Near 4-Year High of 1.8%
Eurostat | Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in the Euro Area are expected to increase 1.8 percent year-on-year in January of 2017, following a 1.1 percent rise in December and beating market expectations of 1.6 percent. It is the highest inflation rate since February of 2013, boosted by fuel prices, preliminary estimates showed. Excluding energy, food, alcohol and tobacco, core inflation is expected to remain steady at 0.9 percent.

Energy is expected to have the highest annual rate in January (8.1 percent, compared with 2.6 percent in December), followed by food, alcohol & tobacco (1.7 percent, compared with 1.2percent in December), services (1.2 percent, compared with 1.3 percent in December) and non-energy industrial goods (0.5 percent, compared with 0.3 percent in December).

Excluding energy only, consumer prices increased 1.1 percent, higher than 1 percent in December. 


Thursday January 19 2017
ECB Leaves Monetary Policy Unchanged
ECB | Joana Ferreira | joana.ferreira@tradingeconomics.com

The European Central Bank held its benchmark refinancing rate at 0 percent for the eighth straight time and left the pace of its bond-purchases unchanged on January 19th, as widely expected. Policymakers confirmed the monthly asset purchases will run at the current monthly pace of €80 billion until March, and from April, they are intended to continue at a monthly pace of €60 billion until the end of the year.

Excerpts from the Introductory statement to the press conference by Mario Draghi:

Looking ahead, we expect the economic expansion to firm further. The pass-through of our monetary policy measures is supporting domestic demand and facilitating the ongoing deleveraging process. The very favourable financing conditions and improvements in corporate profitability continue to promote the recovery in investment. Moreover, sustained employment gains, which are also benefiting from past structural reforms, provide support for private consumption via increases in households’ real disposable income. At the same time, there are signs of a somewhat stronger global recovery. However, economic growth in the euro area is expected to be dampened by a sluggish pace of implementation of structural reforms and remaining balance sheet adjustments in a number of sectors. The risks surrounding the euro area growth outlook remain tilted to the downside and relate predominantly to global factors.

According to Eurostat, euro area annual HICP inflation increased markedly from 0.6% in November 2016 to 1.1% in December. This reflected mainly a strong increase in annual energy inflation, while there are no signs yet of a convincing upward trend in underlying inflation. Looking ahead, on the basis of current oil futures prices, headline inflation is likely to pick up further in the near term, largely reflecting movements in the annual rate of change of energy prices. However, measures of underlying inflation are expected to rise more gradually over the medium term, supported by our monetary policy measures, the expected economic recovery and the corresponding gradual absorption of slack.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for a continued very substantial degree of monetary accommodation to secure a sustained return of inflation rates towards levels that are below, but close to, 2% without undue delay.

Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. In order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European level. The implementation of structural reforms needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost investment, productivity and potential output growth in the euro area. Structural reforms are necessary in all euro area countries. In particular, reforms are needed to improve the business environment, including the provision of an adequate public infrastructure. In addition, the enhancement of current investment initiatives, progress on the capital markets union and reforms that will improve the resolution of non-performing loans, are a priority. Fiscal policies should also support the economic recovery, while remaining in compliance with the fiscal rules of the European Union.