The most important events and reports on the economy, central banks and politics from the Dow Jones Newswires program
Record inflation puts ECB under pressure to hike rates
Inflation in the euro area rose to new record highs in May, putting additional pressure on the European Central Bank (ECB) to end its ultra-loose monetary policy quickly. According to Eurostat, consumer prices rose by 0.8 percent compared to the previous month and were 8.1 (April: 7.4) percent above the level of the same month last year. Economists polled by Dow Jones Newswires had forecast monthly price increases of just 0.5 percent and annual inflation of 7.6 percent.
VP Bank: Rise in inflation bad news for the ECB
According to Thomas Gitzel, chief economist at Liechtenstein’s VP Bank, the unexpectedly sharp increase in inflation in the euro zone in May is bad news for the European Central Bank (ECB). “Inflation rates are now almost at US levels – with the difference that the Fed has already initiated the change in monetary policy,” writes Gitzel in a comment. Meanwhile, the ECB continues to buy securities and interest rates are still in negative territory. “The European monetary authorities are too late,” says the economist.
Pictet: Pressure for big ECB rate hike is increasing
In the opinion of Pictet analyst Frederik Ducrozet, the pressure on the European Central Bank (ECB) to raise its key interest rate by 50 basis points in July as part of a “major” interest rate step is increasing because of the unexpectedly strong rise in inflation in May. “The ECB will not do anything next week, but the pressure to hike 50 basis points in July will increase,” Ducrozet wrote on Twitter.
Commerzbank: Eurozone inflation still at 6 percent at the end of 2022
Commerzbank economist Christoph Weil expects after the unexpectedly sharp increase in euro area consumer prices in May that inflation will still be around 6 percent at the end of this year – even without an oil or gas embargo. “With the ongoing war in Ukraine, energy prices are likely to remain high for the time being,” Weil wrote in a comment. At the same time, the range of goods is restricted by material and delivery bottlenecks, which are likely to be exacerbated by new corona-related plant closures in China. “Companies are now increasingly passing on the resulting increase in the cost of production to consumers,” says the economist.
Rabobank: Euro area recession to start in late 2022/early 2023
After the basic agreement of the EU states on a lembargo against Russia, the analysts at Rabobank are sticking to their forecast that the euro area will fall into recession at the end of 2022 or beginning of 2023. “From the EU’s point of view, this (embargo) is not a paper tiger,” they write in a comment. If the current proposal is implemented, only around 10 percent of EU imports from Russia would remain exempt from the embargo. The re-export of Russian oil, which is imported into the EU via pipelines, will also be limited.
France’s economy shrinks in the first quarter
The French economy contracted in the first quarter of 2022 as consumer spending fell amid high inflation. The gross domestic product (GDP) of the euro zone’s second largest economy fell by 0.2 percent from January to March compared to the previous quarter, according to a revised estimate by the French statistics agency Insee. The data represents a correction from the preliminary reading, which suggested the economy had stagnated for the first three months of the year.
France’s HICP inflation rises to 5.8 percent in May
Price pressure in France increased further in May. Higher prices had to be paid for energy, services, food and industrial goods. The annual inflation measured by the Harmonized Index of Consumer Prices (HICP) rose to 5.8 from 5.4 percent in April, as the statistical office announced in a first publication. Economists polled by Dow Jones Newswires had expected an annual rate of 5.7 percent.
Italy’s economy grows in the first quarter
Italy’s economy developed better in the first quarter of 2022 than initially assumed. The revised gross domestic product (GDP) grew by 0.1 percent compared to the previous quarter, as reported by the statistics agency Istat in a second publication. The first estimate on April 29 had reported a 0.2 percent decline. Compared to the same quarter of the previous year, GDP was 6.2 percent higher. For the time being, only an increase of 5.8 percent was mentioned.
Swiss economy shows solid growth in the first quarter
The Swiss economy continued its recovery in the first quarter of 2022. Between January and March, gross domestic product (GDP) grew by 0.5 percent compared to the previous quarter, according to the State Secretariat for Economic Affairs (Seco). Economists polled by Dow Jones Newswires had expected growth of just 0.3 percent. Year-on-year, GDP was up 4.4 percent. That corresponded to the forecast of konomen.
Turkish economy grows by 7.3 percent in the first quarter
Turkey’s economy grew 7.3 percent year-on-year in the first quarter of 2022, despite inflation hitting its highest level in 20 years in April and the currency depreciating. Growth was supported by private consumption, which grew by 19.5 percent year-on-year, according to statistics agency Turkstat, due to the lifting of Covid-19 restrictions.
German unemployment figures fall less than expected in May
Unemployment in Germany fell less than expected in May. According to information from the Federal Employment Agency (BA), the seasonally adjusted number of unemployed fell by 4,000 compared to the previous month, after falling by 13,000 in the previous month. Economists polled by Dow Jones Newswires had expected a minus of 15,000. As expected, the unemployment rate remained at the previous month’s level of 5.0 percent.
Habeck accuses Orban of nefarious poker in the EU lembargo
Federal Economics Minister Robert Habeck (Greens) is dissatisfied with the European Union’s agreement on a far-reaching lembargo against Russia. Habeck criticized the “nefarious” actions of Hungary’s Prime Minister Viktor Orban, who only approved the embargo after, among other things, the delivery stop was limited to ship deliveries and oil pipelines were exempted.
Lindner: Return to the debt brake takes pressure off prices
Federal Finance Minister Christian Lindner (FDP) has defended the budget plans for 2022 and the planned special fund for the Bundeswehr in the Bundestag against criticism and emphasized the importance of future compliance with the debt brake for price developments. “Returning to the debt brake means taking the pressure off prices by not redistributing more and more and inventing more and more subsidies,” said Lindner at the beginning of the final deliberations on the 2022 federal budget. “We are responding to the economic turning point of inflation by returning to solid budgets and the end of more and more debt.”
Merz: The economy must become less dependent on China
CDU leader Friedrich Merz has called on German business to become more independent from China. It is in Germany’s and Europe’s own interest to break away from China, since Beijing is striving for complete self-sufficiency for the country and wants to become the dominant power in the world by the middle of the century. Merz also criticized Germany’s energy policy in recent years, which had jeopardized its own security of energy supply. He also accused Chancellor Olaf Scholz (SPD) of showing too little leadership in Europe.
Federal ministers avoid clear commitment to Ukraine’s victory
Most members of the federal cabinet are reluctant to state clearly whether they consider Ukraine’s victory in the war forced on the country by Russia to be desirable. The majority of ministers of the FDP were clearly in favor of this. In a survey by the Bild newspaper, the other members of the government concentrated on the fact that Russia must not win the war.
+++ economic data +++
Italy/May consumer prices pre +0.9% mom, +6.9% yoy
Italy/May Consumer Prices PROG: +0.3% mom, +6.3% yoy
UK/Net Lending to Households Apr +GBP5.5bn (Mar: +GBP7.7bn)
UK/Net Lending to Consumption Apr +GBP1.4bn (Mar: +GBP1.3bn)
UK/Net Lending to Consumption Apr PROG: +GBP1.4bn
UK/Net Mortgage Lending Apr +GBP4.1bn (Mar: +GBP6.4bn)
UK/Mortgage Loan Commitments Apr 65,974 (Mar: 69,531)
DJG/DJN/AFP/apo
(END) Dow Jones Newswires
May 31, 2022 07:30 ET (11:30 GMT)