ECB's economic bulletin sees upside benefits from oil, labour markets still a concern
5 February 2015, 12:14
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The Economic Bulletin released today by the European Central Bank highlighted the effects of the sharp decline in oil prices as well as the continuing low inflation environment in the Eurozone.
The bulletin stated that the recent decline in oil prices is supporting the global economic recovery.
Nevertheless, the recovery remains gradual and economic developments vary across regions. Growth in the United States remains robust, momentum is slowing in China, and activity in Japan has not regained traction. Economic conditions in Russia have deteriorated further, but spillovers to other emerging markets remain limited to date. Global trade is showing signs of strengthening. The decline in energy prices has lowered inflation rates globally.
The ECB states that labour markets, while still weak, have improved somewhat further. Employment rose by 0.2 percent quarter on quarter in the third quarter of 2014, following an increase of 0.3 percent in the previous quarter. The unemployment rate for the Eurozone, which started to decline in mid-2013, remained stable at 11.5 percent between August and November 2014. More timely information obtained from survey results points to a modest strengthening of labour markets in the last quarter of 2014.
Looking beyond the short term, the ECB sees the recent fall in oil prices support growth, particularly domestic demand, through gains in the real disposable income of households and in firms’ profits. Domestic demand should also be supported by the Governing Council’s monetary policy measures, the ongoing improvements in financial conditions and the progress made in fiscal consolidation and structural reforms. Furthermore, demand for euro area exports should benefit from the global recovery. However, the euro area recovery is likely to continue to be dampened by high unemployment, sizeable unutilised capacity and the necessary balance sheet adjustments in the public and private sectors. The results from the latest Survey of Professional Forecasters show that private sector GDP growth forecasts were revised down for 2015, by 0.1 percentage point to 1.1 percent, compared with the previous survey round, while those for 2016 remained unchanged at 1.5 percent. At the same time, unemployment expectations remained unchanged.
The bulletin stated that the recent decline in oil prices is supporting the global economic recovery.
Nevertheless, the recovery remains gradual and economic developments vary across regions. Growth in the United States remains robust, momentum is slowing in China, and activity in Japan has not regained traction. Economic conditions in Russia have deteriorated further, but spillovers to other emerging markets remain limited to date. Global trade is showing signs of strengthening. The decline in energy prices has lowered inflation rates globally.
The ECB states that labour markets, while still weak, have improved somewhat further. Employment rose by 0.2 percent quarter on quarter in the third quarter of 2014, following an increase of 0.3 percent in the previous quarter. The unemployment rate for the Eurozone, which started to decline in mid-2013, remained stable at 11.5 percent between August and November 2014. More timely information obtained from survey results points to a modest strengthening of labour markets in the last quarter of 2014.
Looking beyond the short term, the ECB sees the recent fall in oil prices support growth, particularly domestic demand, through gains in the real disposable income of households and in firms’ profits. Domestic demand should also be supported by the Governing Council’s monetary policy measures, the ongoing improvements in financial conditions and the progress made in fiscal consolidation and structural reforms. Furthermore, demand for euro area exports should benefit from the global recovery. However, the euro area recovery is likely to continue to be dampened by high unemployment, sizeable unutilised capacity and the necessary balance sheet adjustments in the public and private sectors. The results from the latest Survey of Professional Forecasters show that private sector GDP growth forecasts were revised down for 2015, by 0.1 percentage point to 1.1 percent, compared with the previous survey round, while those for 2016 remained unchanged at 1.5 percent. At the same time, unemployment expectations remained unchanged.
