EU Data release. European Union (EU) is a strange marriage. Formed almost 30 years ago, the union has seen its ups and downs. Some of its countries like Germany and France have succeeded and achieved tremendous economic growth while some like Greece and Bulgaria have struggled to achieve the promise. Then the United Kingdom (UK) decided to exit in 2016.
In 2017, the EU region saw major growth with the unemployment rate slowing to the lowest level in decades. Manufacturing is surging and the general happiness among the Europeans has improved. However, the headline numbers tell a lie. While the unemployment rate in Germany is currently at 3.9% that of Greece is 23.6%. As a result, the increased inequality among the countries has hampered major monetary policy decisions. For example, while German policy makers are more hawkish on interest rates, their counterparts from other countries are more dovish.
This week, important data from the EU will be released. The release will come just a week after the Monetary Policy Committee (MPC) had their meeting last week. In their meeting last week, the committee left interest rates unchanged and the base deposit rate unchanged at negative 0.4%. In the meeting, the committee made the case for keeping the current stimulus package until September or until inflation picks up.
The meeting also came at a time when there were divisions among the members about the Euro. In the past few months, the Euro has seen its value appreciate against the dollar to the three-year high.
This week, we have already received inflation data from Germany. Today, the Federal Statistical Germany released the MoM and YoY inflation data that came under market expectations. YoY, inflation grew by 1.6% against analysts’ forecasts of 1.7% while the MoM grew by negative 0.7% against the expected negative 0.7%.
Tomorrow, we will receive the MoM retail sales from Germany and the inflation data from Spain, another important and troubled European country. Analysts expect Germany’s retail data to decline by negative 0.4% while the Spanish YoY inflation rate to grow by 0.9%. In addition, we will receive the employment data from Germany. The Street expects the headline number of employment to change by negative 17,000.
Another important data we expect tomorrow is the Euro area inflation and the unemployment rate. Markets expect the headline inflation rate to remain grow by 1.3% which is a point lower than last month’s 1.4%. On the unemployment rate, the street expects it to remain steady at 8.7%. Still, this is a signal about the inequalities in the Euro countries.
On Thursday, we will receive the German manufacturing PMI. This is a number that measures the manufacturing activities in the Euro area. A reading above 50 is often desirable. So, investors look at whether the headline number is growing or not. Markets expect this number to remain steady at 56.5.
The data released this week will be important for investors and traders. Particularly, the headline inflation data will help them conclude on the direction of the ECB. As I have written before, a surprise headline number – like happened in the UK – would lead to the ECB to reconsider their targets.