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. 




Wednesday January 18 2017
Eurozone Inflation Rate Confirmed At Nearly 3-Year High
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

Eurozone's consumer prices increased by 1.1 percent year-on-year in December 2016, following a 0.6 percent gain in the previous month and in line with the preliminary estimate. It was the highest inflation rate since September 2013, mainly boosted by rising prices of fuels.

The largest upward impacts to euro area annual inflation came from fuels for transport (+0.21 percentage points), vegetables (+0.07 pp) and heating oil (+0.05 pp), while gas (-0.10 pp), telecommunications (-0.05 pp) and personal care products (-0.04 pp) had the biggest downward impacts.

The highest annual rates were recorded in Estonia (2.4 percent), Belgium (2.2 percent), the Czech Republic and Latvia (both 2.1 percent). By contrast, negative annual rates were observed in Bulgaria (-0.5 percent), Ireland (-0.2 percent) and Romania (-0.1 percent).

Core inflation which excludes energy, food, alcohol and tobacco was recorded at 0.9 percent compared with 0.8 percent in November. Excluding energy only, the inflation rate rose to 1 percent from 0.8 percent in the previous month.  

On a monthly basis, consumer prices increased by 0.5 percent after falling by 0.1 percent in November, in line with market expectations.

In the full year 2016, the average CPI rose 0.2 percent after showing no growth in 2015.




Monday January 16 2017
Eurozone Trade Surplus Widens Ahead Of Expectations
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Eurozone trade surplus rose to €25.9 billion in November 2016 from €22.9 billion in the same month of the previous year, above market consensus of €22 billion. Exports increased 6 percent while imports went up at a slower 5 percent.

Exports of goods to the rest of the world advanced 6 percent to €184.2 billion from €173.8 billion a year earlier; while imports increased at a slower 5 percent to €158.3 billion compared to €150.9 billion in November 2015.

In January to November 2016, the trade surplus rose to €248.2 billion, compared with €214.3 billion in the same period a year earlier, as exports were nearly unchanged at €1,869 billion and imports dropped 2 percent to €1,620.8 billion.

The European Union recorded a €6.9 billion surplus in trade in goods with the rest of the world, compared with a €5.7 billion surplus in November 2015. Exports went up 5 percent to €156.8 billion from €148.7 billion a year earlier; and imports rose also 5 percent to €149.9 billion compared to €143 billion.

In January to November 2016, the European Union recorded a surplus of €20.2 billion, compared with €39.3 billion in the same period a year ago. Exports of goods dropped 3 percent to €1,581.2 billion from €1,633.1 billion in the same period a year earlier, led by a fall in sales of energy (-16 percent), raw materials (-2 percent), machinery and vehicles (-2 percent), other manufactured goods (-2 percent) and chemicals (-1 percent) while exports of food and drinks rose (+3 percent). Imports shrank 2 percent to €1,561 billion from €1,593.8 billion, as purchases declined the most for energy (-23 percent) and raw materials (-6 percent). Among trading partners, the biggest decreases in shipments were reported for South Korea (-9 percent) and Switzerland (-6 percent); while the decline in imports mainly reflected the strong fall in purchases from Norway (-17 percent) and Russia (-16 percent). 




Thursday January 12 2017
ECB Decision To Extend QE Was Not Unanimous
ECB | Joana Ferreira | joana.ferreira@tradingeconomics.com

The ECB's board agreed that an extension of its quantitative easing programme until December 2017 at a monthly pace of €60 billion was seen as striking the right balance between providing a signal of confidence and the need to preserve stability in an uncertain environment, minutes from the ECB's December meeting showed. However, the decision was not unanimous, as few members opposed both proposals on the table to continue bond purchases beyond March.

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, 7-8 December 2016:

In their assessment of the overall monetary policy stance, members broadly agreed that the inflation outlook and the risks surrounding it warranted keeping a very substantial degree of monetary accommodation in place and extending the APP beyond March 2017. While the recovery was firming and some progress was visible in the inflation trajectory, the scenario of a gradual uptrend in inflation still relied, to a considerable degree, on accommodative monetary policy support. Taken together with the protracted weakness in underlying inflation, a sustained convergence of inflation towards levels below, but close to, 2% over the medium term would not be achieved with sufficient confidence. Therefore, preserving a very substantial degree of monetary accommodation beyond March 2017 was seen as necessary to secure the sustained return of inflation towards levels consistent with the Governing Council’s inflation aim.

Against this background, members exchanged views on the options presented by Mr Praet in his introduction: either to continue APP purchases from April 2017 at the current pace of €80 billion for an additional six months or to extend the programme by nine months until the end of December 2017 at a monthly pace of €60 billion. 

A few members voiced an initial preference for the first option presented by Mr Praet, whereby purchases would be continued at a monthly pace of €80 billion for an intended horizon of six months, while expressing readiness to join a consensus forming on the second option. It was highlighted that the first option had the merit of continuity with established policy and was more in line with market expectations. In addition, its higher monthly pace compared with the second option provided potential for more powerful monetary stimulus in the short term. At the same time, maintaining the monthly pace of €80 billion in an environment of declining market liquidity could put increasing pressure on market yields.

Very broad support emerged among members for the second option presented by Mr Praet, namely to continue purchases beyond March 2017 at a monthly pace of €60 billion for an intended horizon of nine months. Overall, this option was seen as striking the right balance between providing a signal of confidence and the need to preserve stability in an uncertain environment, while having clear merits in terms of flexibility to respond to adverse circumstances and safeguarding operational feasibility. The reduction in the monthly pace, together with the envisaged adjustments of APP parameters, was seen as easing the pressure on market liquidity and ensuring a more robust implementation, while leaving sufficient room for manoeuvre to upscale the programme if needed and allowing for a prolonged presence of the Eurosystem in the market.

A few members could not support either of the two options that had been proposed, while welcoming the scaling-down of purchases and other elements of the proposals, in view of their well-known general scepticism regarding the APP and public debt purchases in particular.
According to this view, the latter should remain a contingency instrument to be employed only as a last resort in an adverse scenario, such as a situation of imminent deflation, which was not applicable at present, as deflation risks had largely dissipated. Moreover, possible adverse side effects from further sovereign asset purchases, particularly in the medium to long term and related to the interaction with the fiscal domain, needed to be taken into account.


Monday January 09 2017
Eurozone Jobless Rate Stable At 9.8% In November
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The seasonally adjusted unemployment rate in the Euro Area stood at 9.8 percent in November 2016, unchanged from the previous month and lower than 10.5 percent a year earlier. It was the lowest unemployment rate since July 2009.

The euro area seasonally-adjusted unemployment rate was 9.8 percent in November 2016, stable compared to October 2016 and down from 10.5 percent in November 2015. This is the lowest rate recorded in the euro area since July 2009. The EU28 unemployment rate was 8.3 percent in November 2016, down from 8.4 percent in October 2016 and from 9 percent in November 2015. This is the lowest rate recorded in the EU28 since February 2009. 

Eurostat estimates that 20.429 million men and women in the EU28, of whom 15.898 million were in the euro area, were unemployed in November 2016. Compared with October 2016, the number of persons unemployed decreased by 41 000 in the EU28 and by 15 000 in the euro area. Compared with November 2015, unemployment fell by 1.552 million in the EU28 and by 972 000 in the euro area.

Among the Member States, the lowest unemployment rates were recorded in the Czech Republic (3.7 percent) and Germany (4.1 percent). The highest unemployment rates were observed in Greece (23.1 percent in September 2016) and Spain (19.2 percent). Compared with a year ago, the unemployment rate in November 2016 fell in twenty-four Member States, while it increased in Estonia (to 7.4 percent in October 2016 from 6.3 percent in October 2015), Cyprus (to 14.2 percent from 13.2 percent), Denmark (to 6.5 percent from 6.1 percent) and Italy (to 11.9 percent from 11.5 percent). The largest decrease was registered in Croatia (to 11.4 percent from 15.7 percent).

There were 4.280 million young persons (under 25) were unemployed in the EU28, of whom 3.007 million were in the euro area. Compared with November 2015, youth unemployment decreased by 137 000 in the EU28 and by 42 000 in the euro area. In November 2016, the youth unemployment rate was 18.8 percent in the EU28 and 21.2 percent in the euro area, compared with 19.5 percent and 21.8 percent respectively in November 2015. In November 2016, the lowest rate was observed in Germany (6.7 percent), while the highest were recorded in Greece (46.1 percent in September 2016), Spain (44.4 percent) and Italy (39.4 percent).




Wednesday January 04 2017
Eurozone Inflation Rate At More Than 3-Year High Of 1.1%
Eurostat | Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in the Euro Area are expected to rise 1.1 percent year-on-year in December of 2016 following a 0.6 percent increase in November. It is the highest inflation rate since September of 2013 and above market expectations of 1 percent, mainly boosted by a rebound in energy prices.

Energy is expected to have the highest annual rate in December (2.5 percent, compared with -1.1 percent in November), followed by services (1.2 percent, compared with 1.1 percent in November), food, alcohol and tobacco (1.2 percent, compared with 0.7 percent in November) and non-energy industrial goods (0.3 percent, stable compared with November). 

Core inflation rate, which excludes prices of energy, food, alcohol and tobacco, is expected to rise to 0.9 percent from 0.8 percent in the previous four months. 

Excluding energy only, the inflation rate accelerated to 1 percent from 0.8 percent in the previous month.


Friday December 16 2016
Euro Area Trade Surplus Below Expectations In October
Eurostat | Yekaterina Guchshina | yekaterina@tradingeconomics.com

The Eurozone trade surplus decreased to €20 billion in October 2016 compared to a €23.2 billion in the same month of the previous year, and below market consensus of €29 billion. Exports decreased 5 percent while imports dropped 3 percent. Considering the first ten months of the year, the trade surplus increased to €223.8 billion, compared with €191.4 billion in the same period of 2015.

Exports of goods to the rest of the world decreased 5 percent year-on-year to €172.5 billion and imports declined 3 percent to €152.4 billion.

In January to October 2016, exports decreased 1 percent to  €1,684.7 billion and imports fell 3 percent to €1,460.9 billion.

The European Union recorded a €2.7 billion surplus in trade in goods with the rest of the world, compared with €2.9 billion in October 2015. Exports and imports went down 5 percent to €146.5 billion and €143.8 billion, respectively.

In January to October 2016, the European Union recorded a surplus of  €14.4 billion, compared with €33.6 billion in the same period a year ago. Exports of goods dropped 4 percent to €1,424.1, led by a fall in sales of energy (-18 percent), raw materials (-4 percent),  machinery and vehicles (-3 percent), other manufactured goods (-3 percent) and chemicals (-2 percent). Imports contracted 3 percent to €1,409.7 billion, as purchases declined the most for energy (-25 percent) and raw materials (-7 percent). Among trading partners, the biggest decreases in shipments were reported for South Korea (-9 percent) and Switzerland (-7 percent); while the decline in imports mainly reflected the strong fall in purchases from Norway (-19 percent) and Russia (-18 percent).



Friday December 16 2016
Eurozone Inflation Rate Confirmed at 0.6% In November
Eurostat | Yekaterina Guchshina | yekaterina@tradingeconomics.com

Consumer prices in the Euro Area increased by 0.6 percent year-on-year in November 2016, following a 0.5 percent growth in the previous month and in line with preliminary estimates. It was the highest inflation rate since April 2014, driven by higher cost of restaurants and cafés and rents and tobacco. Core inflation rate, which excludes prices of energy, food, alcohol and tobacco, was unchanged for the third straight month at 0.8 percent.

The largest upward impacts to euro area annual inflation came from restaurants and cafés (+0.07 percentage points), rents and tobacco (both +0.04 pp); while gas (-0.11 pp), heating oil (-0.05 pp) and package holidays (-0.04 pp) had the biggest downward impacts.

In November 2016, negative annual rates were observed in six Member States. The lowest annual rates were registered in Bulgaria and Cyprus (both -0.8 percent). The highest annual rates were recorded in Belgium (1.7 percent), the Czech Republic (1.6 percent) and Austria (1.5 percent). Compared with October 2016, annual inflation fell in five Member States, remained stable in six and rose in seventeen.

Core inflation which excludes energy, food, alcohol and tobacco was recorded at 0.8 percent, the same as in October. Excluding fuel only, the inflation rose to 0.8 percent from 0.7 percent in the previous month.  

On a monthly basis, consumer prices decreased by 0.1 percent, compared to 0.2 percent growth in October and in line with preliminary estimates.


Wednesday December 14 2016
Euro Area Industrial Output Rises 0.6% YoY In October
Eurostat | Yekaterina Guchshina | yekaterina@tradingeconomics.com

Industrial production in the Euro Area increased 0.6 percent year-on-year in October of 2016, following an upwardly revised 1.3 percent gain in September and worse than market expectations of a 0.8 percent rise. On a monthly basis, production declined 0.1 percent, compared to forecasts of a 0.2 percent growth and mostly due to a fall in non-durable consumer goods.

Year-on-year, production went up at a slower pace for intermediate goods (0.6 percent from 1.4 percent in September) and capital goods (0.9 percent from 1.2 percent) and fell for non-durable consumer goods (-0.9 percent from 1.6 percent) and durable consumer goods (-1.4 percent from -0.4 percent). Meanwhile, energy output rose 2.2 percent (from 1.7 percent in September). 

Considering the EU28, output went up 0.5 percent, following 1.3 percent gain in September as output rose at a slower pace for intermediate goods (0.6 percent from 1.3 percent); capital goods (0.9 percent from 1.2 percent); and fell for durable consumer goods (-1.4 percent from -0.4 percent) and non-durable consumer goods (-0.9 percent from 1.6 percent) while production of energy accelerated (2.2 percent from 1.7 percent). 

Among Member States for which data are available, the highest increases in industrial production were registered in Greece (+7 percent), Latvia (+6.7 percent) and Slovenia (+6.6 percent), and the largest decreases in Ireland (-6.5 percent), Malta (-5.7 percent) and Luxembourg (-2.2 percent).

On a monthly basis, Eurozone industrial output fell 0.1 percent, following an upwardly revised 0.9 percent drop in September and below market expectations of a 0.2 percent growth. Production went down for non-durable consumer goods (-1.5 percent from 0.5 percent) and intermediate goods (-0.5 percent from -0.7 percent) while rose for durable consumer goods (1.5 percent from 5.5 percent); capital goods (1 percent from -2.1 percent); and energy (0.8 percent, after being flat in September). 

In the EU28, the decrease of 0.3 percent was due to production of intermediate goods falling by 0.5 percent and capital goods by 0.7 percent. Output rose for energy by 0.1 percent; durable consumer goods by 1.1 percent and capital goods by 0.3 percent. Among Member States for which data are available, the largest decreases in industrial production were registered in Ireland (-3.6 percent), Sweden (-2.9 percent) and Luxembourg (-2.2 percent), and the highest increases in Denmark (+4.7 percent), Greece (+4.5 percent), Lithuania (+2.7 percent) and Latvia (+2.5 percent).




Thursday December 08 2016
ECB Extends QE Until December 2017
ECB | Joana Ferreira | joana.ferreira@tradingeconomics.com

The ECB held its benchmark refinancing rate at 0 percent for the seventh straight time on December 8th, as widely expected, and extended its programme of quantitative easing until December 2017. Policymakers decided to continue its purchases under the asset purchase programme at the current monthly pace of €80 billion until the end of March 2017. From April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary.

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

As regards non-standard monetary policy measures, we will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017. From April 2017, our net asset purchases are intended to continue at a monthly pace of €60 billion 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. If, in the meantime, the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP.

To ensure the continued smooth implementation of the Eurosystem’s asset purchases, the Governing Council decided to adjust the parameters of the APP as of January 2017 as follows. First, the maturity range of the public sector purchase programme will be broadened by decreasing the minimum remaining maturity for eligible securities from two years to one year. Second, purchases of securities under the APP with a yield to maturity below the interest rate on the ECB’s deposit facility will be permitted to the extent necessary.

The key ECB interest rates were kept unchanged and we continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases.  

Today’s extension of the asset purchase programme has been calibrated to preserve the very substantial degree of monetary accommodation necessary to secure a sustained convergence of inflation rates towards levels below, but close to, 2% over the medium term. Together with the sizeable volume of past purchases and forthcoming reinvestments, it ensures that financial conditions in the euro area will remain very favourable, which continues to be crucial to achieve our objective. In particular, the extension of our purchases over a longer horizon allows for a more sustained market presence and, therefore, a more lasting transmission of our stimulus measures. This calibration reflects the moderate but firming recovery of the euro area economy and still subdued underlying inflationary pressures. The Governing Council will closely monitor the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by using all the instruments available within its mandate.