Monday, 25 October 2021

Euro-Area Economy Gets Higher Inflation But Weaker Growth

(Getty Images)

Bloomberg: A bumper day of euro-area economic releases showed the region’s vital signs remain good, if not great.

The region’s economic expansion entered a sixth year but growth slowed to just 0.3 percent, the weakest in two years. Inflation accelerated further above the European Central Bank’s goal, though that was largely driven by stronger energy prices. Unemployment remained at the lowest since 2008.

The data confirm what ECB President Mario Draghi foreshadowed last week: Some of the sluggishness in output in the first quarter continued into the second, while underlying price pressures remains generally muted.

“So far the ECB is putting a brave face on it,” said Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam. “They decided to wind down their quantitative-easing program on the basis that they’re getting increasingly confident about the macroeconomic environment, so I think that they need to continue to tell that story until they really become worried. But there is still quite a lot of uncertainty.”

But with that assessment came a message of confidence. Policy makers, who are planning to start scaling back stimulus by year end, expect an “ongoing solid and broad-based economic growth” that will bolster wages and produce the right kind of inflation down the line.

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