More problems for the ECB as CPI rises again
(Kitco News) - It has been a mixed bag of data in Europe this morning. First up, Germany missed expectations on their latest GDP reading, recording growth of 1.5% vs. analyst expectations of 2.0%.
The nation has been suffering from further lockdown measures due to the Delta variant of the coronavirus. Although vaccine uptake has improved, there is still some way to go before reaching the levels of adoption seen in other countries like the U.K. or Isreal.
Still, the result was better than last quarter's -2.1%. The report said this was due to higher household and government final consumption expenditure.
Elsewhere EU GDP beat estimates of 1.5% to hit 2% for the quarter. The report from Eurostat said, "Among the Member States for which data are available for the second quarter 2021, Portugal (+4.9%) recorded the highest increase compared to the previous quarter".
On the CPI front, the yearly figure hit 2.2% when the analyst consensus estimate reached 2.0%. This could pose a problem for the ECB if the inflationary pressure continues to persist over time. The new ECB inflation strategy said it would take housing costs into consideration amongst other things and it seems that there has been an overshoot.
Oliver Rackau, chief German economist at Oxford Economics, tweeted, "Today's upside surprise for Eurozone Q2 GDP will dominate the news, but the weakness in core inflation is arguably the more critical data point (even though the fall-back in non-energy goods inflation is likely overstating the weakness given base effects from last July's surge).
German GDP (QoQ) (Q2) 2% vs exp 2.0% vs prev-2.1%
EU CPI (YoY) (Jul) 2.2% vs exp 2.0% vs prev 1.9%
EU GDP (QoQ) 2.0% vs exp 1.5% vs prev -0.3%
EU Unemployment Rate (Jun) 7.7% vs exp 7.9% vs prev 8.0%