Wednesday, 13 December, 2017

Inflation remains weak in eurozone despite stronger growth

Eurozone economy grows at double the pace of the UK in second quarter Eurozone GDP rises while inflation holds steady
Juana Turner | 01 August, 2017, 22:54

First-quarter growth was revised down slightly from 0.6% to 0.5%.

Compared with June 2016, unemployment fell by 2.37 million in the EU28 and by 1.67 million in the euro area.

Core inflation, which strips out volatile components and is seen as a more reliable gauge of inflationary pressures, rose to 1.2%.

The number of people out of work in the European Union's 28 member states remained at 7.7 percent, the lowest figure since December 2008, according to Eurostat.

Forward-looking surveys of business activity in the major sectors of the eurozone economy have also shown a stronger picture than in the United Kingdom this year.

Meanwhile, the euro zone economy has picked up speed, bolstered by higher business optimism, strong domestic consumption and decreasing unemployment, which in June reached its lowest level since 2009.

He added: "Some countries have already released their first estimates of second-quarter GDP growth, showing that the expansion is broad-based within the eurozone".

"We anticipate core inflation remaining well short of the ECB's "below but close to 2 percent" objective, but the solid growth momentum will likely allow the European Central Bank to taper and eventually end its purchases from early next year".

"The economy is recovering and the labor market is doing quite well, but we think core inflation will be at 1 percent and below for the rest of 2017", said Marco Wagner, economist at Commerzbank.

The euro zone may not be growth champion in the second quarter, after the USA rebounded to an annualized 2.6 percent thanks to consumer spending and business equipment investment.

The jobless rate has fallen steadily since peaking in April 2013, after the Eurozone sovereign debt crisis threatened to lead to the break-up of the single currency.

Consumer prices rose at an annual pace of 1.3pc in July, unchanged from the previous month, Eurostat reported yesterday.

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