Those climbing ECB rates
Now we are at it again; Germany's recovery is self-sustaining, inflation is climbing (or at least inflation expectations are) in the Euro-zone and consequently the ECB feels compelled to remain vigilant.
Are energy prices finally spilling over?
"Eurozone inflation has risen to a higher-than-expected 2.5 per cent this, adding to the pressure on the European Central Bank to raise interest rates next month.
The “flash” inflation estimate for the 12-country region, released by Eurostat, the EU’s statistical unit, was the highest since October last year, reflecting the impact of high oil prices, and compared with a rate of 2.4 per cent in April.
“The alarm bells keep ringing at the ECB,” said Alexander Koch, economist at HVB bank in Munich. The ECB aims to keep inflation “below but close” to 2 per cent over the medium term.
Signs that “core” eurozone inflation, excluding volatile oil prices and unprocessed food prices, is also picking-up have exacerbated ECB fears about inflation. However, economists have blamed one-off factors and at 1.6 per cent in April, the core rate remains modest. Fears that central banks will be forced to raise borrowing costs have contributed to recent financial market turmoil."
Moving on to France and Germany ... how are things actually fairing? Unemployment is still large but more importantly it is also structural, but admittedly it is falling as well. The FT article also reports on consumer confidence yet I am inherently sceptical of these measures' ability so say much about anything.
"Meanwhile, Germany and France reported significant falls in unemployment. France said its unemployment rate had dropped to 9.0 per cent, the lowest for three-and-a-half years. In Germany, the seasonally-adjusted unemployment total fell by 93,000 to 4.596m. Germany’s unemployment rate – calculated on a different basis to France’s – fell to 11 per cent in May, from 11.3 per cent in April and the lowest since December 2004.
Separately, German retail sales bounced back more than expected in April, according to figures from the federal statistics office. After having fallen by 1.7 per cent in March, sales were up by 2.8 per cent. That fitted with the picture of a modest improvement in consumer spending in Germany – long the Achilles heel of Europe’s largest economy."
What is with these thrifty (and ageing) German consumers? See here for what I mean with this implicit point about thrift and the demographic composition of society.
"However consumer spending remains constrained by flat or falling real wages and Germans’ propensity to save. Retail sales in March and April together were 0.8 per cent lower than the same months a year before."