Wednesday July 18 2018
Eurozone June Inflation Rate Confirmed at 2%
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

Euro area annual inflation rate was confirmed at a 16-month high of 2 percent in June 2018, up from 1.9 percent in the previous month. Main upward pressure came from energy and food, while services prices rose at a softer pace.

Prices rose at a faster pace for energy (8 percent vs 6.1 percent in May); food, alcohol and tobacco (2.7 percent vs 2.5 percent), of which processed food, alcohol and tobacco (2.6 percent, the same as in May) and unprocessed food (2.9 percent vs 2.4 percent); and non-energy industrial goods (0.4 percent vs 0.3 percent). Meanwhile, services inflation softened to 1.3 percent in June from 1.6 percent in the previous month.

Among Eurozone's largest economies, the highest annual rates were registered in France and Spain (both 2.3 percent), followed by Germany (2.1 percent) and Italy (1.4 percent). 

Annual core inflation, which excludes volatile prices of energy, food, alcohol and tobacco and at which the ECB looks in its policy decisions, was revised to 0.9 percent, below a preliminary reading of 1 percent and May's final 1.1 percent.

On a monthly basis, consumer prices edged up 0.1 percent in June, easing from a 0.5 percent gain in May and matching market consensus.




Monday July 16 2018
Eurozone Trade Surplus Below Forecasts as Exports Fall
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Euro Area trade surplus narrowed to EUR 16.5 billion in May 2018 from EUR 19.3 billion in the same month of the previous year. The latest figure came in well below market expectations of a EUR 20.9 billion surplus due to a drop in exports.

Exports of goods to the rest of the world declined 0.8 percent to EUR 189.6 billion in May from last year's EUR 191.2 billion, while imports rose 0.7 percent to EUR 173.1 billion from EUR 171.9 billion in May 2017. Intra-euro area trade increased 0.5 percent year-on-year to EUR 162.3 billion in May.

Considering the first five months of the year, the trade surplus widened to EUR 80.0 billion from EUR 78.0 billion in the same period of 2017, as exports grew 2.8 percent to EUR 927.6 billion and imports increased 2.8 percent to EUR 847.6 billion.

Meanwhile, the European Union trade surplus narrowed to EUR 0.2 billion in May from EUR 2.3 billion a year ago. Exports fell 2.7 percent to EUR 160.9 billion from EUR 165.4 billion in May 2017, and imports declined 1.4 percent to EUR 160.7 billion from EUR 163.0 billion. 

In January to May, the EU trade deficit increased to EUR 9.1 billion from EUR 8.1 billion in the same period of 2017. Imports rose 1.6 percent to EUR 795.7 billion, boosted by purchases of energy (10.4 percent), other manufactured goods (0.6 percent), and machinery and vehicles (0.5 percent). Meanwhile, imports fell for food and drink (-2.9 percent), chemicals (-1.3 percent) and raw materials (-0.6 percent). Imports rose mainly from China (0.7 percent), Russia (5.5 percent) and Turkey (7.4 percent), but declined from the US (-3.1 percent) and Switzerland (-3.5 percent). Exports went up at a softer 1.5 percent to EUR 786.6 billion, boosted by higher sales of chemicals (5.2 percent), energy (4.8 percent) and other manufactured goods (3.1 percent). By contrast, exports dropped for food and drink (-1.4 percent) and machinery and vehicles (-0.3 percent) while those of raw materials were unchanged. Exports grew to the US (2.1 percent), China (2.5 percent), Russia (1.8 percent) and Turkey (10.4 percent), but dropped to Switzerland (-3.7 percent).




Thursday July 12 2018
ECB Rates Set to Remain at Current Levels as Long as Needed
ECB | Joana Ferreira | joana.ferreira@tradingeconomics.com

ECB officials agreed that policy rates would be kept at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remained aligned with a sustained adjustment path, minutes from the ECB's June meeting showed. Also, policymakers noted that, although the risks surrounding the euro area growth outlook had remained broadly balanced overall, risks related to global factors, including the threat of increased protectionism, had become more prominent.

Excerpts from the Account of the monetary policy meeting of the Governing Council of the European Central Bank, held in Riga on Wednesday and Thursday, 13-14 June 2018:

Overall, the proposed formulation, indicating the Governing Council’s expectation that policy rates would be kept at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remained aligned with a sustained adjustment path, was seen to strike a good balance between providing sufficiently precise guidance and maintaining adequate flexibility. The proposed state-contingent component of the forward guidance on policy rates was widely seen as underlining the gradual and data-dependent approach to policy normalisation. In this regard, explicitly linking a first policy rate rise to inflation evolving along a sustained adjustment path was seen as consistent with the ECB’s forward-looking and medium-term-oriented monetary policy strategy and would underscore the credibility of the Governing Council’s commitment to its price stability objective.

Against this background, members agreed with the communication proposals made by Mr Praet in his introduction. It needed to be emphasised that, while the incoming data had been somewhat weaker than previously expected, the fundamentals remained in place for the medium-term growth outlook to remain solid and broad-based, as also embodied in the June 2018 Eurosystem staff projections. Accordingly, it needed to be highlighted that the underlying strength of the euro area expansion, together with rising price pressures, well-anchored inflation expectations and the continuing ample degree of monetary accommodation, provided grounds for confidence in the sustained convergence of inflation. At the same time, it had to be acknowledged that, although the risks surrounding the euro area growth outlook had remained broadly balanced overall, the incoming information suggested some downside risks to the short-term growth outlook, while risks related to global factors, including the threat of increased protectionism, had become more prominent.

More broadly, it needed to be reiterated that significant monetary policy stimulus was still needed for a continued and sustained adjustment in the path of inflation. It also deserved to be emphasised that, following the phasing-out of the remaining net asset purchases by the end of the year, ample monetary accommodation would still be provided by the sizeable stock of acquired assets and the associated reinvestments, together with the enhanced forward guidance on the key ECB interest rates. In this context, it was important to highlight that, even after a termination of the net asset purchases under the APP, monetary policy would continue to be very accommodative. In particular, it could be stressed that the intention to reinvest principal payments from maturing securities for an extended period of time would still imply a very significant presence in euro area private and public sector bond markets.

Regarding the enhanced forward guidance on policy interest rates, it was felt that the open-ended character of the state-contingent component should be emphasised, with policy rates expected to remain at their present levels for as long as necessary to ensure that the evolution of inflation remained aligned with the Governing Council’s current expectations of a sustained adjustment in the path of inflation, thereby underlining the Governing Council’s consistent and predictable “reaction function” in the pursuit of its medium-term price stability objective.




Thursday July 12 2018
Eurozone May Industrial Output Growth Beats Forecasts
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

Industrial production in the Euro Area rose by 2.4 percent year-on-year in May 2018, following a 1.7 percent advance in the previous month and beating market expectations of 2.1 percent. Output growth picked up for intermediate and non-durable consumer goods.

Year-on-year, output growth picked for both intermediate goods (2.3 percent vs 0.8 percent in April); and non-durable consumer goods (2.4 percent vs 1.2 percent). Also, capital goods output continued to rise at a solid pace (3.9 percent vs 4 percent), while production fell for energy (-1 percent vs -1.1 percent) and durable consumer goods (-0.2 percent vs 0.4 percent).

In the EU28, industrial production went up 2.4 percent (vs 1.9 percent in April), as output increased at faster pace for intermediate goods (2.2 percent vs 0.9 percent) and non-durable consumer goods (2 percent vs 1.1 percent). Meanwhile production growth eased for both durable consumer goods (1.4 percent vs 1.9 percent) and capital goods (3.7 percent vs 4.3 percent). Energy output contracted 0.8 percent in May, after a 0.1 percent decline in April.

Among Member States for which data are available, the highest increases in industrial production were registered in Poland (7.8 percent), Ireland (7.3 percent) and Slovenia (5.9 percent), and the largest decreases in Malta (-6.3 percent), Denmark (-3.3 percent) and Portugal (-2.6 percent).

On a monthly basis, industrial output surged 1.3 percent, recovering from April's 0.8 percent decline and beating forecasts of 1.2 percent gain. It was the steepest increase in industrial production since last November, as output rose for all categories: durable consumer goods (2.1 percent vs -2.1 percent); non-durable consumer goods (2.1 percent vs -1.1 percent); intermediate goods (1.6 percent vs -0.7 percent); capital goods (0.7 percent vs 2.2 percent); and energy (0.5 percent vs -5.2 percent).

In the EU28, output jumped 1.2 percent, following a decline of 0.8 percent in April, due to increases in durable consumer goods (2 percent vs -1.7 percent); non-durable consumer goods (1.7 percent vs -0.8 percent); intermediate goods (1.6 percent vs -0.6 percent); and capital goods (0.6 percent vs 1.2 percent). Energy production, however, continued to fall (-0.1 percent vs -4.4 percent).

Among Member States for which data are available, the largest increases in industrial production were registered in Lithuania (11.6 percent), Sweden (3.4 percent) and Ireland (3.2 percent), and the highest decreases in Denmark (-2.8 percent) and Portugal (-2 percent).




Monday July 09 2018
ECB Monetary Easing Has Been Effective
ECB | Joana Ferreira | joana.ferreira@tradingeconomics.com

Monetary policy has been effective and confidence in the inflation path is rising, Mario Draghi told the European Parliament on Monday. He also said that the aggressive monetary easing implemented in 2014 will have an overall cumulative impact of around 1.9 percentage points on both Euro Area real GDP growth and inflation for the period between 2016 and 2020.

Excerpts from the introductory statement by Mario Draghi, President of the ECB, at the ECON committee of the European Parliament, Brussels, 9 July 2018:

Our confidence in the inflation path is also rising. First, the range of uncertainty around the inflation projections has narrowed. Second, underlying inflation has increased from the very low levels that prevailed in 2016 and is foreseen to rise as the economy continues to expand, capacity utilisation strengthens and labour markets further tighten.

Finally, on the third criterion, the projected path of inflation appears to be self-sustained, i.e. resilient to a gradual ending of net asset purchases.

On the basis of this assessment, the Governing Council concluded that progress towards a sustained adjustment has been substantial so far and should continue in the period ahead, although some uncertainties persist. We therefore anticipate that after September we will reduce our monthly net asset purchases from €30 billion to €15 billion and will end our net asset purchases at the end of December. This is subject to incoming data confirming our medium-term inflation outlook.

The expected end of the net asset purchases in December 2018 does not mean that our monetary policy ceases to be expansionary. Monetary policy will have to continue to accompany the economic expansion for some time. We have therefore reaffirmed our reinvestment policy and enhanced our forward guidance on the key interest rates.

We intend to maintain our policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. And we expect key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path.

Our monetary policy measures have been very effective. We estimate that the measures we have taken since mid-2014 will have an overall cumulative impact of around 1.9 percentage points on both euro area real GDP growth and inflation for the period between 2016 and 2020.

Our measures are playing a decisive role in bringing inflation back on track to reach a level that is below, but close to, 2% over the medium term. However, we need to be patient, persistent and prudent in our policy to ensure that inflation remains on a sustained adjustment path.


Monday July 02 2018
Eurozone Unemployment Rate Unchanged at 9-1/2-Year Low
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The unemployment rate in the Euro Area stood at to 8.4 percent in May 2018, unchanged from the previous month's revised figure and below 9.2 percent a year earlier. The jobless rate remained at its lowest level since December 2008, as the number of unemployed continued to fall.

Compared with April, the number of unemployed in the Euro Area decreased by 125,000 to 13.656 million. Compared with the previous year, it fell by 1.252 million.

Considering the European Union, the unemployment rate stood at 7 percent in May, stable compared to the previous month and down from 7.7 percent a year ago. It was the lowest rate recorded in the EU28 since August 2008. There were 17.207 million people unemployed, a decrease of 154,000 from the previous month and of 1.828 million from May 2017.

Among EU Member States, the lowest unemployment rates in May were recorded in the Czech Republic (2.3 percent) and Germany (3.4 percent). The highest unemployment rates were observed in Greece (20.1 percent in March 2018) and Spain (15.8 percent). Compared with a year ago, the largest decreases were registered in Cyprus (8.4 percent from 11.4 percent), Croatia (8.9 percent from 11.3 percent), Greece (20.1 percent from 22.1 percent between March 2018 and March 2017) and Portugal (7.3 percent from 9.2 percent).

The youth unemployment rate was 15.1 percent in the EU28 and 16.8 percent in the Euro Area, compared with 17.2 percent and 19.3 percent respectively in May 2017. The lowest rates were observed in Malta (4.8 percent), Germany (6.1 percent), Estonia (6.8 percent in April 2018) and the Netherlands (6.9 percent), while the highest were recorded in Greece (43.2 percent in March 2018), Spain (33.8 percent) and Italy (31.9 percent).




Friday June 29 2018
Eurozone Inflation Rate Picks Up to 16-Month High
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The inflation rate in the Euro Area is expected to edge up to 2 percent year-on-year in June 2018 from the previous month's 1.9 percent, and in line with market expectations. It is the highest rate since February 2017, mainly boosted by higher prices of energy and food.

Looking at the main components of euro area inflation, prices are expected to rise at a faster pace for: energy (8 percent vs 6.1 percent in May); food, alcohol and tobacco (2.8 percent vs 2.5 percent), of which processed food, alcohol and tobacco (2.7 percent vs 2.6 percent) and unprocessed food (3 percent vs 2.4 percent); and non-energy industrial goods (0.4 percent vs 0.3 percent). Meanwhile, services inflation should soften to 1.3 percent in June from 1.6 percent in the previous month.

Annual core inflation, which excludes volatile prices of energy and unprocessed food and tobacco and at which the ECB looks in its policy decisions, is expected to slow to 1 percent in June from 1.1 percent in May, also in line with market consensus.


Friday June 15 2018
Eurozone April Trade Surplus Larger than Expected
Eurostat | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Euro Area trade surplus widened to EUR 16.7 billion in April 2018 from EUR 15.7 billion in the same month of the previous year, and beating market expectations of EUR 14.2 billion.

Exports of goods to the rest of the world surged 8 percent to EUR 182.9 billion in April from last year's EUR 169.3 billion, and imports jumped 8.1 percent to EUR 166.2 billion from EUR 153.7 billion in April 2017. Intra-euro area trade increased 9.8 percent year-on-year to EUR 157.4 billion in April.

Considering the first four months of the year, the trade surplus widened to EUR 64.4 billion from EUR 58.7 billion in the same period of 2017, as exports grew 3.8 percent to EUR 738.2 billion and imports increased 3.2 percent to EUR 673.8 billion.

Meanwhile, the European Union trade deficit narrowed to EUR 1.0 billion in April from EUR 1.4 billion a year ago. Exports went up 6.8 percent to EUR 154.8 billion from EUR 144.9 billion in April 2017, and imports rose 6.6 percent to EUR 155.9 billion from EUR 146.3 billion. 

In January to April, the EU trade deficit decreased to EUR 8.3 billion from EUR 10.4 billion in the same period of 2017. Exports went up 2.7 percent to EUR 625.7 billion, boosted by higher sales of chemicals (6.3 percent), other manufactured goods (4.5 percent), machinery and vehicles (2.1 percent), and energy (1.5 percent). By contrast, exports of food and drink fell 0.8 percent and those of raw materials were unchanged. Exports grew to the US (3.0 percent), China (2.7 percent), Russia (4.9 percent) and Turkey (11.7 percent), but dropped to Switzerland (-3.2 percent). Imports rose at a slower 2.3 percent to EUR 634.0 billion, boosted by purchases of energy (8.4 percent), other manufactured goods (2.1 percent), machinery and vehicles (1.9 percent), and raw materials (0.8 percent). Meanwhile, imports fell for both food and drink (-3.7 percent) and chemicals (-1.6 percent). Imports rose mainly from China (2.3 percent), Russia (3.5 percent) and Turkey (8.6 percent), but declined from the US (-3.1 percent) and Switzerland (-2.2 percent).


Friday June 15 2018
Eurozone Inflation Rate Confirmed at 1.9%
Eurostat | Joana Taborda | joana.taborda@tradingeconomics.com

Annual inflation in the Euro Area went up to 1.9 percent in May of 2018 from an upwardly revised 1.3 percent in April, matching the preliminary estimate. It is the highest inflation rate since April of 2017, mainly due to a rise in oil prices.

The highest upward contribution to inflation rate came from services (+0.72 percentage points), followed by energy (+0.58 percentage points), food, alcohol & tobacco (+0.50 percentage points) and non-energy industrial goods (+0.08 percentage points).

Prices of energy (6.1 percent compared to 2.6 percent in April) recorded the highest increase, followed by food, alcohol and tobacco (2.5 percent compared to 2.4 percent), services (1.6 percent compared to 1 percent) and non-energy industrial goods (0.3 percent, the same as in April).

Among Eurozone's largest economies, the highest annual rate was registered in France (2.3 percent), Germany (2.2 percent), Spain (2.1 percent) and Italy (1 percent).

Annual core inflation, which excludes volatile prices of energy, food, alcohol and tobacco and at which the ECB looks in its policy decisions, was confirmed at 1.1 percent in May, higher than an upwardly revised 0.8 percent in April. It was the lowest core inflation rate since September 2017.

On a monthly basis, consumer prices rose 0.5 percent, in line with market expectations.



Thursday June 14 2018
ECB Announces an End to its Bond Buying Programme
ECB | Joana Ferreira | joana.ferreira@tradingeconomics.com

The ECB held its benchmark refinancing rate at 0 percent on June 14th and said the monthly pace of the net asset purchases will be reduced to €15 billion from September to December 2018, and will then end. The central bank also said it expects key interest rates to remain unchanged at least through the summer of 2019.

The ECB cut its growth forecast for 2018 (2.1 percent vs 2.4 percent in the March projection), while that for 2019 and 2020 was unchanged at 1.9 percent and 1.7 percent respectively. Meanwhile, inflation is now expected at 1.7 percent for both 2018 and 2019, way above a previous estimate of 1.4 percent.

ECB Statement:

At today’s meeting, which was held in Riga, the Governing Council of the ECB undertook a careful review of the progress towards a sustained adjustment in the path of inflation, also taking into account the latest Eurosystem staff macroeconomic projections, measures of price and wage pressures, and uncertainties surrounding the inflation outlook.

Based on this review the Governing Council made the following decisions:

First, as regards non-standard monetary policy measures, the Governing Council will continue to make net purchases under the asset purchase programme (APP) at the current monthly pace of €30 billion until the end of September 2018. The Governing Council anticipates that, after September 2018, subject to incoming data confirming the Governing Council’s medium-term inflation outlook, the monthly pace of the net asset purchases will be reduced to €15 billion until the end of December 2018 and that net purchases will then end.

Second, the Governing Council intends to maintain its policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

Third, the Governing Council decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path.

Today’s monetary policy decisions maintain the current ample degree of monetary accommodation that will ensure the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term.