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Eurozone Consumer Prices Fall Less Than Expected: Jobless Rate Lowest Since 2012
Eurozone inflation remained negative for the third straight month in February due to falling energy prices. Nonetheless, the rate of decline in overall prices slowed more than expected, diluting fears of deepening deflation even before the European Central Bank practically starts bond purchase this month.
The unemployment rate in the 19-nation currency bloc reached its lowest since April 2012, another report showed Monday.
According to flash estimates from Eurostat, the harmonized index of consumer prices fell 0.3 percent in February from last year, slower than January's 0.6 percent decline and the expected decrease of 0.5 percent. Final data is due on March 17.
The decline in December was the first fall since October 2009 and the 0.6 percent decrease seen in January was the biggest decline since July 2009.
The European Central Bank aims to bring inflation towards the target of below, but close to, 2 percent over the medium term.
Despite the marked narrowing of deflation in February, it still looks more likely than not that the Eurozone will suffer modest deflation for several more months to come, IHS Global Insight's Chief European Economist Howard Archer said.
Jennifer McKeown, an economist at Capital Economics said the quantitative easing programme beginning this month is unlikely to push inflation to anywhere near the ECB's target and the risk of a sustained bout of deflation remains significant.
Core inflation that excludes energy, food, alcohol and tobacco remained unchanged at 0.6 percent in February. The rate matched economists' expectations.
Within overall prices, energy prices plunged 7.9 percent and non-energy industrial goods prices were down 0.2 percent. Meanwhile, cost of food, alcohol and tobacco increased 0.5 percent and services cost advanced 1.1 percent.
The unemployment rate dropped marginally to 11.2 percent in January from a revised 11.3 percent in December, Eurostat reported today. It was forecast to remain at December's originally estimated rate of 11.4 percent.
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Euro Hits $1.12 on Upbeat German Retail Sales
The euro surged on Tuesday after Germany surprised with upbeat retail sales data for January.
The euro rose 0.26% to $1.1211, a fresh daily high, sailing to somewhat safer waters after it hit $1.1158 in the previous session - it's lowest level since January 26.
"We remain bearish on the EUR even as we expect a positive 0.4% m/m print in German retail sales on Tuesday. Against the backdrop of ECB QE, upward surprises in inflation and activity data lift inflation expectations and lower real rates," BNP Parisbas wrote on Tuesday.
Retail turnover in Germany gained 2.9% in real terms month-on-month in January, compared to a revised 0.6% increase recorded in the previous month and market expectations of a 0.4% increase.
Measured on an annual basis, the gauge rose 5.3% in the reported period following an increase of 4.8% in the preceding month, while analysts had projected an expansion of 3.0%.
Moreover, Monday’s European PMI data did show some evidence of a potential turnaround in some areas of the various economies in Europe, with Ireland showing its strongest performance since 1999 in the manufacturing sector, but there were also some worrying areas of weakness in France and Greece in particular, where both economies showed sharp contractions in their manufacturing sectors.
"Greece in particular continues to be a cause for concern with contradictory noises coming out of Athens with respect to the government’s willingness to abide by the agreement that appeared to be sealed last week. There still appears to be significant pushback from politicians in Athens about abiding by the terms of the current bailout agreement," Michael Hewson from CMC Markets wrote in a research note on Tuesday.
Technical analysis
EUR/USD is moving sideways on intraday charts, after a huge sell-off from the mid $1.13's level. The current swing low lies at $1.1159.
From a bigger perspective, EUR/USD is now on the way to lows from January at $1.1096 after a very short lived correction, lasting a little bit over a month.
Unemployment in Spain Falls in February
The number of unemployed in the fourth biggest economy in the euro zone recorded a decrease in February, the latest official data from the Spanish Employment Ministry showed on Tuesday.
The number of unemployed in Spain fell by 13,500 in February, measured on a monthly basis, after the considerable increase seen in the previous month.
Spain still fights with one of the highest unemployment rates in the euro zone, with youth joblessness particularly concerning for the country's policymakers.
The unemployment rate in Spain disappointed and stagnated in the three months to December 2014, according to a report from the Spanish Ministry of Employment and Social Security published in January.
The unemployment rate rose to 23.70% in the fourth quarter of 2014, compared to 23.67% seen in the previous quarter. The Spanish jobless rate hit an all-time high of 26.94% in the first quarter 2013.
Economic performance remains strong
Spain saw its economy expanding in the fourth quarter, suggesting that the economic recovery has maintained momentum in 2014 after five troubled years, according to the final official data released by the National Institute of Statistics on Friday.
The final figures confirm that the euro area's fourth largest economy saw its gross domestic product (GDP) grow 0.7% quarter-on-quarter during the October-December period, after adding 0.5% in the third quarter last year. Analysts had expected the same 0.7% result as suggested in the preliminary release.
It was the sixth consecutive quarter of continuous growth in Spain.
Similarly, on an annual basis, the economy added 2.0%, compared to the third quarter's 1.6% hike and 1.2% in the second quarter. Markets had bet on confirmation of preliminary suggested 2.0% GDP growth.
source
During the course of yesterday session, EURUSD initially rallied but enough selling pressure again at 1.1236 to turn things back around and close at the open of the day, creating a doji candle. We continue to trade in the “no man’s land” between 1.1236 downward to 1.1097.
Looks like the pair is waiting for the ECB monetary policy on Thursday and U.S jobs report on Friday.
Euro Factory-Gate Inflation in Red for 18th Mth in Jan: PPI
Industrial producer prices in the euro area, a proxy for the closely watched consumer prices, retreated again in January, with the gauge booking its 18th straight month in contraction on an annual basis, Eurostat showed on Tuesday.
The Producer Price Index (PPI), an indicator tracking price change from the perspective of the seller, trashed 3.4% year-on-year in the first month of the year, hastening the downturn given December's downwardly revised 2.6% decline.
Analysts had called for a 3.0% slide.
The last time the gauge rose was in June last year, when it ticked up a mere 0.1% on the year. A month later, it posted zero growth just to slide into contraction territory in August, from which it still hasn't recovered.
"Uncomfortable news on the inflation front for the ECB," Howard Archer, economist from IHS, said.
"While the latest purchasing managers’ surveys indicate that Eurozone manufacturing activity is now slowly improving, companies remain under intense pressure to price competitively to gain, or even retain, business. Meanwhile, recent sharply falling input prices have given manufacturers scope to cut prices," he added.
No good news for ECB
Furthermore, the reading won’t offer any respite for the European Central Bank ahead of Thursday’s meeting, as the gauge gave up 0.9%, when compared with December.
During the previous month, the gauge gave up 1.0%, posting its third straight month in contraction. Market consensus had been for a 0.7% downturn growth in January.
source
EUR/USD: Euro Fights for $1.12, Rebounds From Monthly Low
German Services at 5-Month High in February
Germany's services sector improved during the month of February, according to the latest PMI reading, which was released by Markit Economics on Wednesday.
The German services PMI swung higher to a seasonally adjusted 54.7 in the second month of the year, from the January reading of 54. The preliminary figure surprised on the upside by rising to 55.5 points, topping analysts estimates.
A reading above 50.0 marks expansion in the sector, while one below 50.0 shows contraction. The figure is a key indicator of economic health because businesses react quickly to current conditions, and purchasing managers have unique insight into the company's view of the economy.
The headline gauge has remained in expansion territory - above the 50-point threshold - for almost two years.
Manufacturing PMI
A separate survey from Monday, targeted specifically at the manufacturing sector, showed the sector in the euro area's number one economy was in a better shape in February compared to the previous month.
The manufacturing PMI for Germany edged up to 51.1 points in February, the final reading showed. The gauge came in marginally up from January’s 50.9 points.
That said, the nation's factories remained above the contraction line for a third successive month. Analysts predict an improving economic environment and a softer euro should help boost demand in the coming monhts, maintaining the positive development.
Euro Zone Economy Pulls Ahead: PMI
he euro zone economy took a stronger hold in February, according to final surveys of purchasing managers released on Wednesday, showing signs that the currency bloc started to move toward a more sustainable recovery.
Data firm Markit, which surveys more than 5,000 businesses across the currency bloc, said that its composite PMI - a measure of activity in the manufacturing and services sectors - rose to 53.7 in February, up from 52.6 booked in the previous month.
A flash print published in late February showed the gauge at 53.9, beating original expectations of 53.0.
Meanwhile, a separate sub-index tracking development in the services arena recorded 53.7 during the second month of the year, compared to 52.7 seen in February.
A preliminary survey hinted at a 53.9 result, beating original forecasts, which had called for a 53.0 figure.
February manufacturing PMI
Activity in the manufacturing sectors across the euro zone pointed to gradually improving conditions in February, the final report from Markit Economics showed on Monday. Economic growth appears to be gathering momentum and looks set to gain further traction in the coming months.
The final manufacturing PMI for the euro zone came in at 51.0 points in February, the same as January's six-month high, remaining in expansion territory for 20 straight months. Analysts had bet on the same reading as the preliminary 51.1 points result.
A reading below 50.0 indicates activity is declining, while a reading above that level indicates it is increasing.
Four biggest economies
Earlier in the day, a string of partial data from the bloc's biggest members was published.
The services PMI for Spain recorded 56.2 points in February, after reaching 56.7 points in the previous month, with the respective reading remaining in expansion territory for the sixteenth month in a row. Market analysts had expected a 56.6 figure.
The Italy services PMI cItaly services PMI came in at 50.0 in the second month of the year, up from the 51.2 in January, while analysts had expected the gauge to rise to 51.4 points.
The final services PMI in France came in at 53.4 in the second month of the year, in line with the preliminary 53.4 result as well as the 49.4 seen in January. Analysts had expected confirmation of the flash result....
The German services PMI swung higher to a seasonally adjusted 54.7 in the second month of the year, from the January reading of 54. The preliminary figure surprised on the upside by rising to 55.5 points, topping analysts estimates.
ECB's QE to boost euro zone economy
Markets wait for the European Central Bank (ECB) to launch its signature quantitative easing (QE) program on Thursday. In January, the ECB unveiled a QE program to support the euro zone economy, which will deliver €60 billion of fresh liquidity monthly until September 2016, bringing the total size to roughly €1.1 trillion.
The Draghi policy is supposed to tame deflationary trends, jump start the crawling economy in the euro zone and trickle down to the "real economy", boosting demand in the single currency area.
source
January 2015 eurozone retail sales 1.1% vs 0.1% exp m/m
Prior 0.3%
During the course of yesterday session, EURUSD went back and forth, creating another doji candle. We continue to trade in the “no man’s land” between 1.1236 downward to 1.1097.
I do not expect any movement beyond “no man’s land” range before the ECB monetary policy tomorrow and U.S jobs report on Friday.