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MNI (London)
By Luke Heighton
     LONDON (MNI) - The latest Euro Area economic data has done little to shift
the policy debate in the wake of the European Central Bank's July Governing
Council meeting, with a mixed bag seen in the past week or so.
     Inflation in July was up 2.1% on the year, with both German and French
numbers coming in just above expectations. However, the central bank still
expects base effects to kick in over coming months, helping push headline rates
lower. Retails sales in June were up just 0.3% on May's figure across the E19,
compared alongside an increase of 1.2% for the year, with sales of food, drinks
and tobacco driving the change.
     June's euro area industrial producer prices (IPP) index for rose just 0.4%
month-on-month, but was up by 3.6% on the same time last year.
     German factory orders fell 4.4% in June on the previous month -- attributed
to a decline in demand from non-eurozone countries -- while capital and consumer
goods orders slumped by 4.7% and 4.5% respectively -- underlining comments from
the Ifo Institute that companies in Germany, Italy and the Netherlands have
scaled back their growth expectations "significantly".
     Seasonally adjusted GDP is expected to be up by 0.3% in the euro area for
July and by 0.4% in the EU28, a gain of +2.1% and +2.2 on Q2 2017, with Q1 per
capita real household income and consumption nearly stable in both areas.
     With data before (and after) the ECB's meeting largely in line with
expectations, the Governing Council stayed true its word ahead of the summer
break: key interest rates went unchanged, and the aim to taper off, then end,
the bank's monthly asset purchasing program by the end of the year was
     There is broad consensus that pace and scale of Europe's economic expansion
is slowing, that confidence has fallen over the last 12 months, and
destabilizing political threats -- from both within and without -- persist.
     President Mario Draghi said little to suggest an imminent divergence from
his previous announcement that rates will remain at their current level until at
least until/during/after the summer of 2019 (depending on which translation of
June's decision you read), .
     The ECB president said that while nominal inflation rates were edging
higher), core levels remained "muted" making it still "very early to call
victory". But with Bank rates seemingly fixed for the foreseeable future, Press
attention in Frankfurt focused mainly on the issues of capital reinvestments,
protectionism, and life after Mario Draghi.
     On the first point, the message was clear. The capital key remains "our
anchor", Draghi said, but when it comes to reinvestments: "We haven't discussed
it. We haven't discussed even when to discuss it". The Governing Council also
"took note" of the agreement apparently reached between the EU and President
Donald Trump just days beforehand, but "it's too early to assess the actual
     Asked if Greece was any closer to full integration into the ECB's QE
programme, Draghi said he welcomed the "successful actions undertaken by the
Greek Government so far," and was "looking forward to a successful completion"
of the current program.
     Draghi was more expansive when asked if the debate around finding his
successor might be unduly influenced by expectations of a rate hike around the
time of his departure.
     The point, he replied, "is kind of strange; why should rate hikes be
influenced? Maybe in the perverse minds of some market players might - this may
be true, but certainly not in the Governing Council members' minds".
--MNI London Bureau; tel: +44 203-586-2225; email:
--MNI Frankfurt Bureau; +49-69-720-146; email:
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MNI London Bureau | +44 203-865-3812 |