June 7, 2020

Mixed Signals for European Central Bank as Data Point to Slowdown

The Organization for Economic Cooperation and Development forecast Monday that euro zone economies will see a “marked slowdown” next year, and called on the European Union to clarify its anti-crisis measures, The Associated Press reported.

In an update of economic forecasts timed to coincide with this week’s meeting of the Group of 20 major economies, the Paris-based O.E.C.D. said “patches of mild negative growth” were likely in the euro zone in 2012.

It predicted economic growth in the euro zone would stall at 0.3 percent next year, after just 1.6 percent growth this year. That is down from the O.E.C.D.’s forecast in May of 2 percent growth in the euro zone in 2012.

“Detailed information is needed” on how the European Union will implement the package of measures announced last week aimed at resolving the European debt crisis, the O.E.C.D. said.

Inflation in the 17 countries that belong to the euro area was steady in October at 3 percent, according to figures from Eurostat, the European Union statistical agency. That was contrary to analyst predictions of a slight drop because of slowing economic growth. However, unemployment edged higher to 10.2 percent in September from 10.1 percent in August, Eurostat said.

The data, along with a muted official forecast for Spanish growth, offer no easy choices for Mario Draghi when he presides over his first monetary policy meeting as president of the European Central Bank on Thursday.

Some economists expect the E.C.B. to cut its benchmark interest rate on Thursday in response to signs of a marked slowdown by the euro area economy. The Bank of Spain said Monday that the Spanish economy stopped growing in the three months through September, as government austerity measures cut into domestic consumption.

At the same time, inflation remains well above the E.C.B.’s target of about 2 percent. As a result Mr. Draghi, anxious to establish his credentials as an inflation fighter, may be hesitant to preside over a rate cut just days after succeeding Jean-Claude Trichet as E.C.B. president.

“Our forecast is for the first cut to be delivered this week but this uncomfortably high headline inflation reading may make the E.C.B. want to wait until December,” analysts at HSBC wrote in a note to clients Monday.

Economists said joblessness was likely to rise further as the sovereign debt crisis continues to act as a drag on euro-area growth. An additional 188,000 people became unemployed in September, a total of 16.2 million people, the biggest increase in two years.

“The outlook is not particularly bright for the euro area labor market,” Francois Cabau, an analyst at Barclays Capital, wrote in a note.

Unemployment was highest in Spain, at 22.6 percent, and Greece, at 17.6 percent. Italy recorded one of the biggest jumps in joblessness, to 8.3 percent from 8 percent, as well as one of the biggest increases in inflation, to 3.8 percent from 3.6 percent.

The rise in Italian prices was caused partly by an increase in the value-added tax. Still, the data may add to the heat that Prime Minister Silvio Berlusconi is feeling from other leaders, who are showing frustration with his failure to push through policies to make the Italian economy perform better. Italy has replaced Greece as the biggest threat to the euro area, as bond investors begin to doubt that the country will be able to service its debt.

Article source: http://feeds.nytimes.com/click.phdo?i=97129c5c581e857a4bc049ca9c7f4abb

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