EUR: Italy fell into recession, and inflation in key eurozone countries continues to slow down

Trading 31 jan 2019 Donner votre avis

Weak data on the growth of the eurozone economy, which came out today in the first half of the day, hurt euro buyers. It does not allow to form the continuation of the new upward trend formed after yesterday's report of the Federal Reserve System.

The Eurozone GDP growth in 2018 turned out to be the weakest in four years and only good data on the German labor market, which began in 2019 with a strong note and limited the downward movement in risky assets.

According to the report of the Federal Employment Service of Germany, the number of applications for unemployment benefits decreased by 2,000 in January 2019 compared with December. On the other hand, economists had forecast a decline in the number of unemployed in the country by 10,000 in January. The number of registered vacancies in January was 758,000. Despite the reduction in the number of applications, there was a slowdown compared with December, which, together with recent statistics on the German economy as a whole, does not form a bright prospect for the future. In January, the unemployment in Germany remained unchanged at the level of 5.0%.

As I noted above, GDP growth in the eurozone has seriously slowed.

According to the EU Statistics Agency, the eurozone's GDP in 2018 grew by only 1.8% over the year, after rising 2.4% in 2017. As for the growth in the 4th quarter compared to the 3rd quarter of 2018, then the growth came close to zero and amounted to only 0.2%, which completely coincided with economists' forecasts. A similar indicator was observed in the 3rd quarter of 2018.


All of these suggest that the prospects for the eurozone economy at the beginning of this year are very weak due to increased geopolitical and trade risks. Activity is still noticeable in Spain and Germany but Italy has already slipped into recession. The German authorities today revised their forecasts for the country's GDP growth in the current year to 1% from 1.8%.

A report was issued Already today, stating that the preliminary GDP of Italy in the 4th quarter of this year fell immediately by 0.2% compared to the 3rd quarter and grew only by 0.1% over the year. Economists had forecast of 4% decline in Italy's GDP by 0.1% and a 0.3% increase, respectively.

Most likely, individual problems of the Italian authorities in pursuit of widening the budget deficit can be attributed to obvious reasons affecting the decline in economic growth in many eurozone countries. Let me remind you that last year there was a multi-month confrontation between the Italian government and the EU due to the planned increase in the budget deficit, which affected business and consumer sentiment.

As for the preliminary data on inflation, the CPI of France in January of this year fell immediately by 0.5% m / m and rose only by 1.2% on an annualized basis. Economists had expected inflation to fall by 0.6% and growth by 1.1%, respectively. The EU harmonized consumer price index HCPI of France in January rose 1.4% year-on-year.

As for the similar indicators in Spain, the harmonized consumer price index HCPI in January rose by 1.0% per annum against the forecast of growth by 1.2%.

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