-ECB on track to reach inflation goal
Last week, markets followed inflation and unemployment data in the Euro area and focused on the European Commission’s business and consumer survey results.
Euro area annual inflation is expected to reach 1.9 percent in May 2018, up from 1.2 percent in April 2018, according to a flash estimate from Eurostat, the statistical office of the European Union (EU).
This represents the highest rate since April last year and brings the headline inflation rate up to the goal of the European Central Bank (ECB) of just below 2 percent.
Energy is expected to have the highest annual rate in May at 6.1 percent, compared with 2.6 percent in April. Food, alcohol & tobacco follow and is anticipated at 2.6 percent, compared with 2.4 percent in April. Services are forecast to make 1.6 percent, compared with 1.0 percent in April and non-energy industrial goods are set to reach 0.2 percent, compared with April’s 0.3 percent.
Experts believe that Euro area inflation puts pressure on the ECB in terms of its policy measures, the extent of which could be seen at the next ECB Governing Council meeting on June 14 in Riga, which will be hosted by Latvijas Banka.
On the other hand, the Euro area’s seasonally adjusted unemployment rate was 8.5 percent in April, down from 8.6 percent in March and from 9.2 percent in April 2017. This is the lowest rate recorded in the euro area since December 2008.
The EU unemployment rate was 7.1 percent in April 2018, stable compared with March 2018 and down from 7.8 percent in April 2017. This remains the lowest rate recorded in the EU since September 2008.
However, economic confidence continues to decline. According to the results of the European Commission's Business and Consumer Survey, the economic confidence index in the Euro area fell to 112.5 in May from 112.7 in April. This declining trend, which started in December 2017, is now continuing into May.
The moderate decline in Euro area sentiment resulted from decreases in industry and services confidence, which were largely offset by strong increases in the retail trade and construction sectors. Confidence among consumers remained virtually flat.
-The week ahead
This week, the first quarter’s GDP and main aggregates will be the most important economic data for the Euro area. Additionally, a number of ECB officials, including President Mario Draghi, will give speeches in Frankfurt.