Overnight News Recap: Trichet & Almunia Worried About Inflation

News Recap | Written by CEP News | Jul 02 08 11:04 GMT |

CEP News) - Comments from European Central Bank President Jean-Claude Trichet and EU Commissioner Joquin Almunia continuing to express inflation concerns headlined the overnight's economic news. The overnight also saw the release of above-forecast producer prices in the euro zone and some hawkish comments from Dallas Fed President Dennis Lockhart (non-voter).

Speaking at the Europlace Conference in Paris, France on Wednesday, European Central Bank President Jean-Claude Trichet said that more efforts would be needed before a single retail banking market could be realized. However, he did acknowledge that substantial efforts had been made towards this goal.

Trichet also mentioned that more international cooperation would be necessary to address the weaknesses in the financial system that had been uncovered during the market crisis. Before beginning his speech, Trichet emphasized that he would not comment on monetary policy ahead of the ECB's council meeting on Thursday and that nothing in his speech at the Europlace conference should be interpreted as a policy signal.

Nevertheless, in an interview with Germany's Die Zeit newspaper to be published on Thursday, Trichet emphasized that inflation could "explode" if the ECB failed to act decisively.

In a Europe 1 radio interview on Wednesday, EU Commissioner for Economic and Financial Affairs, Joaquin Almunia, expressed concern over current inflation levels and said the ECB must follow its price stability mandate. Additionally, Almunia was worried about the economic growth outlook in Europe, as well as the impact of the current financial crisis on the economy.

The Ministry of Labour and Immigration reported that the number of unemployed in Spain rose by 36,849 individuals in June on a monthly basis, up significantly from the 15,100 rise seen in May. In June 2008, a total of 2,390,424 individuals who consider Spain their primary place of residence were unemployed, up 1.57% month-over-month and 21.6% in annualized terms.

The National Institute of Statistics (ISTAT) reported that the Italian government's cumulative net deficit rose to 4.7% of GDP in the first quarter of 2008. The previous quarter had seen the year-to-date deficit reach 1.86% of GDP, revised up from 1.3%. In monetary terms, the Italian government's deficit was recorded at €17.5 billion in Q1. In 2007, the deficit had reached €28.6 billion.

The National Board of Customs reported that the Finnish trade balance surplus rose to €951 million in April from March's €300 million. However, in annual terms, the surplus declined 29% from April 2007's €1.3 billion level. In April 2008, Finland exported €6.4 billion in goods and services, while importing €5.4 billion worth.

According to a Eurostat press release, euro zone producer price inflation reached 1.2% in May on a monthly basis, up from the 0.9% growth rate expected and recorded in the previous month. April's figure was revised up from 0.8%. Excluding the costs of energy, producer prices increased 0.3% in monthly terms. Energy sector prices rose 4.1% in May.

Year-over-year, euro zone PPI jumped by a record high of 7.1%. Economists had only expected a 6.7% rise, up from the previous month's 6.2% increase. April's growth rate was revised up slightly from 6.1%.

According to the Bank of England, housing equity withdrawals fell to £5.04 billion in the first quarter of 2008, its lowest level in seven years. Economists had expected housing equity withdrawals to decline to £5.3 billion after slipping to £7.4 billion in the previous period. Q4 2007's reading was revised up from an initial figure of £7.3 billion.

According to data released by Markit Economics on Wednesday, the UK purchasing managers' index for construction fell to 38.8 in June, lower than both the previous month's 43.9 reading and the 43.1 figure expected. June's PMI figure marks the lowest reading in more than 11 years.

Speaking at a panel discussion in Washington D.C., Atlanta Fed President Dennis Lockhart (non-voter) said inflation was at uncomfortable levels and that policy would need to react decisively to counter it if it began to affect wages. Although he promised that he was taking price developments seriously, Lockhart said wages had not yet been affected by inflation. He also said the first half of 2009 should see 1% to 2% growth in GDP with not much pickup in the second half.

The Australian Bureau of Statistics (ABS) announced that the seasonally-adjusted estimate of turnover for the Australian Retail and Hospitality/Services industries increased 0.7% in May 2008. This follows a revised decrease of -0.1% in April and a revised increase of 0.3% in March. The consensus was expecting a 0.1% increase.

According to the Australian Department of Employment and Workplace Relations, skilled vacancies declined by 0.1% month-over-month in June compared to a downwardly revised 0.5% fall in May.

The Australian Bureau of Statistics said building approvals for May declined by 6.5% month-over-month, further than forecasts for a 3.4% decline. In April, approvals expanded by a revised 5.4%. In annualized terms, approvals rose by 0.2% despite forecasts for a 7.2% increase and the previous month's revised 5.2% increase.

JN Monetary Base (Y/Y) June +0.4% vs. Prior: -0.9%

AU DEWR Skilled Vacancies (M/M) June -0.1% vs. Revised: -0.5% Prior: -0.1%

AU Retail Sales May +0.7% vs. Exp: +0.1% Revised: -0.1% Prior: -0.2%

AU Building Approvals (M/M) May -6.5% vs. Exp: -3.4% Revised: +5.4% Prior: +7.8%

AU Building Approvals (Y/Y) May +0.2% vs. Exp: +7.2% Revised: +2.8% Prior: +5.2%

EU ECB's Trichet Speaks at Europlace Conference in Paris

IT Deficit to GDP (year to date) Q1 +4.7% vs. Revised: +1.9% Prior: +1.3%

GB PMI Construction June 38.8 vs. Exp:43.1 Prior: 43.9

GB BoE Housing Equity Withdrawal Q1 £5.0B vs. Exp: £5.3B Revised: £7.4B Prior: £7.3B

EU Euro-Zone PPI (M/M) May +1.2% vs. Exp:+0.9% Revised: +0.9% Prior: +0.8%

EU Euro-Zone PPI (Y/Y) May +7.1% vs. Exp:+6.7% Revised: +6.2% Prior:+6.1%

By Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it with contributions from Tim Stackpool, tstackpool@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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