Frankfurt letter, week beginning March 7

Euro zone Inflation

The Euro area’s annual inflation is expected to be -0.2 percent in February 2016, down from 0.3 percent in January, according to a flash estimate from Eurostat, the statistical office of the European Union.

Inflation across the 19-country Eurozone re-entered negative territory in February, official figures showed on Monday.

The "stubborn inflation" in the euro area puts pressure on the European Central Bank (ECB) to take further additional policy actions. The ECB will unveil another stimulus package at its next policy meeting on Mar. 10 to boost development.

Euro zone unemployment

There was good news about unemployment. The euro area’s seasonally-adjusted unemployment rate saw the lowest rate recorded in the euro area since August 2011. It was 10.3 percent in January 2016, down from 10.4 percent in December 2015. However, youth unemployment still poses a big problem for both the Eurozone economy and the EU. In January 2016, the youth unemployment rate was 19.7 percent in the EU and 22 percent in the euro area.

Eurozone "urgently" needs higher growth

"The euro area is still recovering from a once-in-a-generation economic and financial crisis that has left deep scars on the economy," ECB governing council member Benoit Coeure said, according to remarks prepared for a speech and posted on the central bank’s website on Wednesday.

"The Eurozone urgently needs higher growth to bring down high unemployment, to deleverage the economy and to raise inflation back to our price stability objective," he added.

European stocks

Last week, the European markets followed a fluctuating course. The markets at closure were mostly mixed excluding Tuesday and Friday when the markets closed up.


Germany's unemployment rate remained at a record low of 6.2 percent in February, the Federal Labor Agency said Tuesday.

As expected by economists, the number of people out of work decreased by 10,000 from January.

Eurostat estimates the unemployment rate at 4.3 percent.

The credit constraints for German trade and industry rose to 14.5 percent in February from 14.3 percent last month, according to Results of the Ifo Business Survey for February 2016.

However, there was little change to the favorable financing conditions for German businesses. Firms still have no difficulty in obtaining credit.


Next week ahead

This week, the global markets will monitor the press conference of the ECB. The ECB is expected to review and possibly loosen its monetary policy and even to cut rates at its meeting in Frankfurt.

The ECB is also likely to see a downward revision on the macroeconomic outlook in the updated staff projections.

07 Mar,2016