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Euro zone inflation seen well below 2 percent in 2014-15: Nowotny
Inflation in the euro zone will likely stay "significantly" below the European Central Bank's target this year and next, ECB Governing Council member Ewald Nowotny said in the Austrian National Bank's annual report.
"But over the medium term it is likely to align itself with the ECB's objective of keeping inflation below but close to 2 percent," he added in the report released on Tuesday.
He said an economic recovery in the euro zone - and even more so in Austria - was showing signs of accelerating in 2014 and 2015.
ECB goes on 300 million euro spending spree for bank watchdog
The European Central Bank will spend 300 million euros ($410 million) this year and next in building an elite group to monitor top banks, with the lion's share spent on generous pay for many of its staff.
While the new watchdog is funded by a levy on the banks rather than by taxpayers, the wage bill could reignite a debate about salaries for European Union officials after protest parties triumphed in elections to the European Parliament in France, Britain and elsewhere.
For the hiring spree, which has prompted a flood of 8,000 applications, the ECB has a 156 million euro budget in 2015 for 1,000 staff earning low-tax salaries of up to 245,000 euros a year for the top supervisors.
The new authority in Frankfurt will lead supervision of banks throughout the 18 countries of the euro zone, overseeing a clean-up of the sector this year and ensuring that the lenders blamed for triggering the financial crisis are kept in check.
Revealing the budget for the "Single Supervisory Mechanism" (SSM), the ECB defended what it called "comparatively good conditions" as necessary to recruit qualified staff.
"You need to have some good people," said Steven Keuning, the ECB's budget chief, told reporters on Tuesday. "This is not amounting to a very lavish bureaucracy."
A further 78 million euros or so will be spent next year on travel, consultancy and information technology, while 26 million euros is set aside for premises.
The 'gross salaries and other personnel costs' at the agency work out at roughly 156,000 euros per person. ECB President Mario Draghi earned 378,000 euros last year while the watchdog's chief, Daniele Nouy, does not disclose her salary.
The issue of pay for top European civil servants is contested while the economy remains sluggish and unemployment in some countries such as Spain and Greece is at a record high.
"People are being alienated for several reasons," said Costas Chrysogonos of Greece's leftist Syriza party, who will join the growing number of critical voices in the European Parliament following the elections which ended on Sunday.
"There is huge inequality. There are people in Bulgaria who are paid 150 euros a month for their work. And there are people in Brussels who are being paid some tens of thousands of euros."
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The EU changes its tone
There is no escaping the change in political mood in Europe after the publication of European Parliament election results over the weekend. There were wins for a spread of parties with manifestos against austerity, further EU integration and also immigration. On the face of it, the impact of this on markets has been pretty minimal, not least because it was widely expected. But there is a wider message that European leaders will no doubt be discussing at their meeting in Brussels later today, namely that national electorates are not happy with the EU and what it is doing (and trying to do). Ultimately, this is going to make further bail-outs and/or support mechanisms that much harder to put together in the future and any policies of further integration (which were seen as the means to avoid a future crisis) are not going to gain the required political support. For FX, it’s not something to get excited about now, but it could well be an underlying theme for the coming months.
For today, markets return from holidays in the UK and US. The data is unlikely to rock the boat, with durable goods in the US, together with house prices and consumer confidence. Note that BoE Governor Carney is due to speak this evening and markets will be sensitive to any comments on the housing market or rates, given the growing discussion of the timing of a possible first rate rise. EURGBP stands just below the 0.81 level whilst cable is sitting just below 1.69. Both rates are key to watch into month end given the potential for further sterling gains on the rate story.
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In April 2014, household consumption of goods declined slightly (-0.3%)
In April, household consumption expenditure on goods decreased by 0.3% in volume*, after a 0.6% increase in March. This decline resulted mainly from the decrease in expenditure on energy products.
Engineered goods : dipping slightly
Durables: rising
Household expenditure on durable goods speeded up slightly in April (+0.5% after +0.3%), an acceleration mainly attributable to car purchases (+0.7% after +0.4% in March). Purchases of household durables decelerated but kept growing (+0.2% after 0.7%).
Textile-leather: decreasing again
Household consumption of textile, clothing and leather dropped again (–1.5%, after –1.7%). This has been the third consecutive month of decrease since February.
Other engineered goods: declining
In April, consumption expenditure on other engineered goods bounced back (–0.4% after +0.3%), especially because of a decline in expenditure on hardware.
* Volumes are chained and all figures are trading days and seasonally adjusted.
EUR/USD May 28 – Weak Eurozone Numbers Weigh on Euro
EUR/USD has edged lower on Wednesday, as the pair trades slightly above the 1.36 line in the European session. Eurozone releases are not enjoying a good day, as French Consumer Spending and German Unemployment Change both missed expectations. On Tuesday, CB Consumer Confidence posted another strong reading and beat the estimate. There are no US releases on Wednesday.
EUR/USD showed little movement in the Asian session, trading close to 1.3630. The pair has edged lower in the European session.
Euro drops to fresh 3-month lows against dollar
The euro fell to fresh three month lows against the dollar on Wednesday, pressured lower by mounting expectations that the European Central Bank will implement new easing measures at its upcoming policy meeting next week.
EUR/USD hit lows of 1.3605, the weakest since February 13 and was last down 0.21% to 1.3607.
The pair was likely to find support at 1.3575 and resistance at 1.3636, the session high.
The euro has weakened broadly against the other major currencies, falling more than 2% against the dollar since the ECB indicated at its May 8 meeting that it is comfortable with easing monetary policy in June to help shore up the fragile recovery in the region.
On Tuesday, ECB President Mario Draghi said the bank was aware of the risks of persistently low inflation and was prepared to take steps to get euro zone inflation back to its target, the latest indication that the bank could ease monetary policy as soon as next week.
The annual rate of euro zone inflation was 0.7% in April, well below the ECB's target of close to but just below 2%.
Meanwhile, data on Wednesday showed that the number of people unemployed in Germany rose by the largest amount in five years in May. The seasonally adjusted jobless total rose by 24,000 this month to 2.905 million, compared to expectations for a fall of 15,000.
The German unemployment rate remained unchanged at 6.7%, well below the euro zone average of 11.8%.
The euro was also lower against the yen, with EUR/JPY down 0.25% to 138.70, holding above the more than three month low of 138.13 struck last Wednesday.
Elsewhere, the euro pushed higher against sterling, with EUR/GBP easing up 0.17% to 0.8125, recovering from the 17-month low of 0.8080 set last Friday.
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German May Unemployment Rises Unexpectedly
Confounding expectations, German unemployment increased for the first time in six months in May, but the labor office said it is largely due to weather related factors.
The number of people out of work increased by around 24,000 to 2.91 million in May, the Federal Labor Agency reported Wednesday. This was the first increase in six months and confounded expectations for a decline of 15,000.
However, Eckart Tuchtfeld, an analyst at Commerzbank said the latest increase is not a trend reversal. The firms expects a further slight decline in unemployment in the coming months.
That said, this is probably due in part to the very mild winter, making seasonal fluctuations smaller than usual. The situation on the labor market should therefore continue to improve for the time being, Tuchtfeld added.
Nonetheless, unemployment declined by 61,000 to 2.88 million, on an unadjusted basis.
The jobless rate remained unchanged at a seasonally adjusted 6.7 percent in May, as widely expected by economists.
Data released by Destatis earlier in the day showed that the ILO unemployment rate dropped to 5.3 percent in April from 5.5 percent in the previous month.
About 2.26 million people were unemployed in April. Compared with March, the number of unemployed was down by 62,000 or 2.6 percent. At the same time, employment increased 166,000 or 0.4 percent from March due to the usual spring upturn.
The Purchasing Managers' survey results from Markit Economics showed that private sector companies hired additional workers in May, stretching the current sequence of employment growth to seven months.
The rate of job creation accelerated for the second month running and was the sharpest since late-2011, it said.
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Eurozone Economic Confidence Rises To 34-Month High
Eurozone economic sentiment improved more-than-expected in May to a 34-month high, driven by higher confidence among consumers and industry managers, survey results showed Wednesday.
The economic sentiment index rose to 102.7 in May, the highest since July 2011, from 102 in April, the European Commission said. The score was also above the consensus of 102.2.
Although the renewed rise in the economic sentiment indicator suggests that the Eurozone recovery might gather a little pace in the second quarter, growth will probably remain too weak to ward off deflationary pressures, James Howat, a European economist at Capital Economics said.
The rise in confidence is good news but it is unlikely to deter the European Central Bank from acting in June, IHS Global Insight's Chief European Economist Howard Archer said. He expects the ECB to deliver a package of stimulative measures at its June 5 meeting, including interest rate cuts and liquidity measures.
Among the five sub indicators of ESI, four components strengthened from April and one remained unchanged in May.
Industrial confidence improved to -3 from -3.5 in the previous month. The moderate increase in industry confidence was backed by managers' more optimistic production expectations and a brighter appraisal of the current level of overall order books.
Confidence in services climbed to 3.8 from 3.5. Managers' more positive appraisal of the past business situation and past demand were partially offset by lower demand expectations.
Consumer confidence brightened in May, thanks to consumers' more optimistic assessment of all components of the confidence indicator. The index rose to -7.1, the highest since September 2007, from -8.6 in the prior month. The score matched the flash estimate published on May 21.
At the same time, sentiment among retailers remained unchanged at -2.5 in May. This was the result of a strong increase in managers' appraisal of the present business situation that was fully absorbed by a more negative assessment of both the volume of stocks and the expected business situation.
The slight improvement in construction confidence was backed by managers' more optimistic views on employment expectations, while their assessment of the level of order books worsened. The corresponding indicator came in at -30, up from -30.4 in April.
The survey revealed that inflation expectations increased in May after falling for three months in a row. Nonetheless, it remains substantially below its long-term standards.
Employment plans increased in construction and industry, while deteriorated in retail trade and, particularly, services.
In March, the jobless rate in the 18-nation currency bloc was 11.8 percent. Eurostat is set to release unemployment figures for April on June 3.
Another survey from the commission showed that business confidence improved slightly after weakening in April. The business climate indicator rose by 0.09 points to +0.37 in May.
Managers' evaluation of the past production improved markedly, while production expectations, overall order books and export order books booked more moderate increases. Managers' views on stocks of finished products remained broadly unchanged.
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Spanish GDP On Tap For Thursday
Release of GDP report from Spain, Hungary unemployment figures and the economist conference opening in Madrid with speech by Luis Linde of the Bank of Spain are some of the notable economic events scheduled for the day.
At 3 am ET, the statistical office INE is set to release Spanish GDP report for the first quarter of 2014. The Spanish economy is expected to expand 0.4 percent quarter-on-quarter, in line with the preliminary estimate.
At the same time, the Hungarian Central Statistical Office releases the unemployment rate. The Hungary's jobless rate for February to April is seen at 8.4 percent.
April industrial output for Croatia is expected at 5 am ET from the Croatian Bureau of Statistics. Previously, a year-over-year rise of 0.7 percent was logged in March.
At 7 am ET, Russia's report on foreign exchange and gold reserves for May is expected.
Bank of Spain's Governor Luis Linde is expected to speak at the opening of the economist conference in Madrid at 4 am ET.
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