ECB’s monthly bulletin paints an upbeat picture on the Eurozone economy. In short, even though incoming information was “somewhat weaker than expected”, they remains consistent with “ongoing broad-based economic expansion”. The expansion is supported by ” domestic demand and continued improvements in the labour market. Risks are “broadly balanced”.
On prices, measures of underlying inflation “remained generally muted but stand above earlier lows”. At the same time “Supply chain price pressures for non-energy industrial goods in the HICP continued to increase.” “Wage growth developments point to increasing domestic cost pressures.”
Also, ECB noted that the EONIA forward curve shifted slightly upwards over the review period. And, that indicates “market participants revised up their interest rate expectations for longer horizons.”
Here are some highlights of ECB monthly bulletin:
External environment
- Global survey indicators of economic growth have weakened recently as the global economic cycle matures.
- Risks to the global economy remain to the downside, amid ongoing actions and threats regarding trade tariff increases by the United States and possible retaliation by the affected countries.
- Global financial conditions remain supportive for advanced economies, while creating headwinds for emerging market economies.
- The global trade momentum has moderated, but the near-term outlook remains steady.
- Global inflation was stable in August.
- Oil markets have been mainly affected by factors related to the US sanctions against Iran.
Financial developments
- Euro area government bond yields have risen since mid-September.
- Broad indices of euro area equity prices declined.
- Yield spreads on bonds issued by euro area NFCs remained relatively insulated from tensions in sovereign debt and equity markets.
- The EONIA forward curve shifted slightly upwards over the review period. Market participants revised up their interest rate expectations for longer horizons.
Economic activity
- Incoming information, while somewhat weaker than expected, remains overall consistent with ongoing broad-based economic expansion.
- Looking ahead, short-term indicators point to continued strength in the labour market in the coming quarters.
- Household income continued to support growth in private consumption.
- Private consumption is expected to display resilient growth in the coming quarters.
- Following the weak first quarter of 2018, investment growth rebounded in the second quarter.
- Investment is expected to continue to grow solidly, supported by robust domestic demand and favourable financing conditions.
- Euro area trade growth remained moderate at the beginning of the third quarter of 2018.
- Overall, the latest economic indicators suggest ongoing broad–based growth.
- The economic expansion is supported by domestic demand and continued improvements in the labour market.
- The risks surrounding the euro area growth outlook are assessed as broadly balanced.
Prices and costs
- Euro area annual HICP inflation was 2.1% in September, up from 2.0% in August.
- Measures of underlying inflation have remained generally muted but stand above earlier lows.
- Supply chain price pressures for non-energy industrial goods in the HICP continued to increase.
- Wage growth developments point to increasing domestic cost pressures.
- Both market and survey-based measures of longer-term inflation expectations have remained stable.
