Day: August 30, 2024

Eurozone inflation softened to the lowest since mid-2021 in August on a fall in energy prices, adding chances of another interest rate cut by the European Central Bank.

The harmonized index of consumer prices rose 2.2 percent on a yearly basis in August, slower than July’s 2.6 percent increase, flash data from Eurostat showed Friday. This was the lowest since July 2021 and also matched expectations.

Excluding prices of energy, food, alcohol and tobacco, core inflation slowed only marginally to 2.8 percent from 2.9 percent.

On a monthly basis, the HICP moved up 0.2 percent.

Among main components of HICP, services showed the highest annual growth of 4.2 percent after posting 4.0 percent rise in July. Food, alcohol and tobacco prices also rose at a faster pace of 2.4 percent after a 2.3 percent gain.

Non-energy industrial goods moved up 0.4 percent, weaker than July’s 0.7 percent rise. Meanwhile, energy prices fell 3.0 percent, marking the first drop in four months.

Among big-four economies, Germany’s HICP inflation hit 2.0 percent in August and Italy showed the lowest rate of 1.3 percent.

France’s inflation moderated to 2.2 percent from 2.7 percent. Likewise, Spain’s inflation came in at 2.4 percent, down from 2.9 percent a month ago.

At the July policy meeting, the ECB had kept the interest rates unchanged after lowering them for the first time in five years at the June meeting.

“For the ECB, the modest progress in core inflation and wages now and expectations for next year seem enough to cut by 25bps in September,” ING economist Bert Colijn said.

But the economist said this remains a slow and gradual process of releasing the brakes on the economy as the central bank continues to be concerned about upside risks to the inflation outlook.

Capital Economics’ economist Jack Allen-Reynolds said the unexpected increase in services inflation will stop the ECB from cutting interest rates at its next meeting in September.

If services inflation declines over the rest of the year, the ECB is likely to continue gradually reducing interest rates with another 25 basis point cut in December.

Eurozone inflation softened to the lowest since mid-2021 in August on a fall in energy prices, adding chances of another interest rate cut by the European Central Bank.

The harmonized index of consumer prices rose 2.2 percent on a yearly basis in August, slower than July’s 2.6 percent increase, flash data from Eurostat showed Friday. This was the lowest since July 2021 and also matched expectations.

Excluding prices of energy, food, alcohol and tobacco, core inflation slowed only marginally to 2.8 percent from 2.9 percent.

On a monthly basis, the HICP moved up 0.2 percent.

Among main components of HICP, services showed the highest annual growth of 4.2 percent after posting 4.0 percent rise in July. Food, alcohol and tobacco prices also rose at a faster pace of 2.4 percent after a 2.3 percent gain.

Non-energy industrial goods moved up 0.4 percent, weaker than July’s 0.7 percent rise. Meanwhile, energy prices fell 3.0 percent, marking the first drop in four months.

Among big-four economies, Germany’s HICP inflation hit 2.0 percent in August and Italy showed the lowest rate of 1.3 percent.

France’s inflation moderated to 2.2 percent from 2.7 percent. Likewise, Spain’s inflation came in at 2.4 percent, down from 2.9 percent a month ago.

At the July policy meeting, the ECB had kept the interest rates unchanged after lowering them for the first time in five years at the June meeting.

“For the ECB, the modest progress in core inflation and wages now and expectations for next year seem enough to cut by 25bps in September,” ING economist Bert Colijn said.

But the economist said this remains a slow and gradual process of releasing the brakes on the economy as the central bank continues to be concerned about upside risks to the inflation outlook.

Capital Economics’ economist Jack Allen-Reynolds said the unexpected increase in services inflation will stop the ECB from cutting interest rates at its next meeting in September.

If services inflation declines over the rest of the year, the ECB is likely to continue gradually reducing interest rates with another 25 basis point cut in December.

French inflation slowed to a three-year low in August due to the sharp slowdown in energy price growth and the economy registered a slower-than-initially estimated growth in the second quarter on weaker contribution from trade and subdued investment, official data revealed Friday.

The consumer price index posted an annual increase of 1.9 percent after rising 2.3 percent in July, provisional data from the statistical office INSEE showed.

This was the weakest growth since August 2021 but came in above economists’ forecast of 1.8 percent.

Similarly, the EU harmonized inflation softened to 2.2 percent in August from 2.7 percent in the previous month. Inflation was seen at 2.1 percent.

Monthly CPI inflation more than doubled to a six-month high of 0.6 percent from 0.2 percent in July. The HICP also grew 0.6 percent after a 0.2 percent rise.

Due to the base effect, energy prices grew only 0.5 percent annually after July’s 8.5 percent surge. Driven by accommodation and transport services, prices of services climbed at a faster pace of 3.1 percent.

Food prices gained at a steady pace of 0.5 percent, while manufactured products prices slid 0.1 percent.

Producer prices declined for the eighth consecutive month in July, the statistical office reported today. Producer prices in the domestic market fell 5.4 percent annually but slower than the 5.9 percent decrease in June.

Month-on-month, producer prices moved up 0.2 percent, in contrast to the 0.2 percent drop in June.

In a separate communiqué, the INSEE said gross domestic product grew 0.2 percent sequentially, which was weaker than the initial estimate of 0.3 percent. In the first quarter, economic growth was 0.3 percent.

Household consumption edged up 0.1 percent, offsetting the 0.1 percent fall a quarter ago. At the same time, growth in government spending slowed to 0.4 percent from 0.6 percent.

Gross fixed capital formation declined 0.4 percent mainly as a result of a 0.9 percent decrease in construction and 2.7 percent drop in capital goods investment.

Overall, the contribution of final domestic demand excluding inventories to GDP growth was zero this quarter.

Driven by the dynamism of transport equipment shipments, exports climbed 0.4 percent. Imports rose only 0.1 percent. Overall, the contribution of foreign trade to GDP growth was 0.1 point.

Finally, the contribution of inventory changes to GDP growth was zero.
Another data showed that household consumption rebounded in July, underpinned by the increases in energy and food consumption.

Household spending gained 0.3 percent on month in July, in contrast to the 0.6 percent decrease in June.

Due to the rise in fuel consumption, particularly gasoline, spending on energy rebounded 0.9 percent. Likewise, household food consumption recovered 0.4 percent due to higher purchases of meat and other food products. At the same time, household consumption of engineered goods was stable.

The statistical office today confirmed that France’s payroll employment was flat in the second quarter. This followed an increase of 0.3 percent in the first quarter.
Private payroll employment dropped slightly by 0.1 percent, while public payroll employment grew 0.3 percent.

German unemployment increased less than expected in August despite weak economic activity, official data revealed Friday.

The number of unemployed persons increased only 2,000 to 2.8 million in August, the Federal Employment Agency reported. Unemployment was forecast to rise 17,000, the same pace of increase as seen in July.

The jobless rate stood at 6.0 percent in August, the same rate as seen in July and June.

On an unadjusted basis, the number of people out of work rose by 63,000 to 2.9 million.

“The labor market continues to feel the effects of economic stagnation,” Andrea Nahles, the chairwoman of the Federal Employment Agency said. Unemployment and underemployment continued to increase during the summer break, Nahles added.

However, suggesting a slowdown in the labor market, data showed that job openings totaled 699,000 in August, down by 72,000 from a year ago.

Based on the labor force survey, Destatis today said the number of unemployed remained unchanged at 1.53 million in July. The jobless rate held steady at 3.4 percent.

The unadjusted unemployment rate was 3.7 percent compared to 3.0 percent in the same period last year, Destatis reported.

Elsewhere, official data today showed that the euro area unemployment rate slid to seasonally adjusted 6.4 percent in July from 6.5 percent in June. There were 10.99 million unemployed people in the currency bloc.