Tuesday 8 January 2008

Eurozone confidence falls, producer price inflation rises

Confidence in the eurozone economy fell in December. Bloomberg reports:

An index of executive and consumer sentiment in the euro area slipped to 104.7, the lowest since March 2006, from 104.8 in November, the European Commission in Brussels said today...

The decline, however, was less than expected, and unlike in the US, the labour market is not pointing towards weaker growth.

The decline in the confidence index was less than economists forecast, based on the 104.3 median of 21 estimates in a Bloomberg survey. A separate report today showed that unemployment in the euro region remained at a record low of 7.2 percent in November.

That leaves inflation still a concern.

Gauges of potential future prices in today's report may heighten concern among central bankers that accelerating inflation could trigger larger wage increases...

An index of manufacturers' selling-price expectations increased to 13 last month from 12 in November, while consumers' inflation expectations held at 28, which economists at ING Group said is "well above the long-term average of 23"...

Separately, producer prices rose an annual 4.1 percent in November, the most since they increased by the same margin in December 2006. The gain was above the 3.3 percent of October and the 4 percent median forecast in a Bloomberg survey of economists...

The recent "substantial increase" in oil and food prices is "having a strong upward impact on inflation," ECB President Jean-Claude Trichet said Jan. 5, adding that the economy faces a "more protracted" period of elevated inflation than previously expected.

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