October 31, 2014
A stressful week ended on a quiet newsday for the eurozone.
After the bank stress tests and the associated hype, reality returned to the eurozone as Germany reported yet another fall in inflation rates. Annual HICP inflation fell from 0.8% in September to 0.7% in October, according to the German statistical office. The more detailed German national measures holds up 0.8% yoy, but shows a mom decline by 0.3% from September. The breakdown of the data shows that the weakness stems entirely from energy and manufactured goods prices, both of which are negative.
A Reuters article sampled some opinion among traders, according to which the latest marginal improvements in confidence indicators and bank lending would be enough to hold off further monetary policy action for a while.
The eurozone inflation data for October will come out this morning. The market consensus is for a small increase in the headline rate. With Germany HICP headlines rates falling, that would imply rising HICP rates elsewhere in the eurozone.
In Spain, HICP inflation was -0.2%, after -0.3% in September, while the national measure was -0.1%. The rates have been oscillating around zero for the past 13 months. Unlike other eurozone countries, Spain has managed to achieve some modest GDP growth. The 3rd quarter GDP advanced estimate, one month before the full analysis, puts the yearly growth rate at 1.6%. This is the 4th consecutive quarter of positive yoy growth rates, and the 7th quarter of accelerating growth. The picture that emerges from these indicators is that the Spanish economy started a year ago on a trajectory of accelerating growth but with flat prices and consumption.
We have no inflation figures for Italy, but we noted a couple of other statistics this morning, which give us a sense of a stabilisation – at a very low level. Istat reports that the number of people at risk of poverty or social exclusion fell from 29.9% in 2012 to 28.4% in 2013. There was a relative shift in risks – we presume due to policies – as the situation of elderly people improve while the situation worsened dramatically for families with many children. Corriere della Sera reports that, the percentage of families that managed to put aside some savings had risen from 29% to 33% in the last twelve months.
We also have stories on how Spain rescue foreign creditors; on the discussion of a precautionary credit line for Greece; on whether the BES scandals will have macroeconomic consequences for Portugal; on a language problem in European supervision; on German paranoia about QE, and a hilariously funny comment on the stress tests.