Week ahead: 7-11 July


The ECB kept its main rates unchanged as announced in June’s meeting when the Governing Council cut interest rates and also announced quantitative side measures aimed at fighting the inflation threat and boosting lending. In the press conference yesterday, the President of the ECB, Mario Draghi, revealed more details of the offer of cheap loans that the central bank made to Eurozone lenders last month and reiterated the bank’s commitment to use unconventional measures to revert prices’ trend, in particular not ruling out extra rate cuts. The expansionary monetary policy is likely to increase if the deceleration of growth in Europe is verified throughout the year and deflation risks rise.

Furthermore, Draghi announced the ECB is going to move its monthly meetings to a six-week cycle and publish regular accounts of its deliberations beginning in January 2015, which will moving the ECB closer to the way other big central banks work. This may improve communication and transparency in the ECB, although this has not been a problem in the last few years. On the other hand, if minutes with votes disclosed are to be published, this may create more pressure on the members of the Governing Council to act only in the benefit of their own countries. 

In Portugal, according to the Portuguese Debt Agency, the country issued USD 4500 millions of public debt at 10 years to North American fund managers (who usually do not buy in euros), considered the biggest operation of this type made by European countries since 2005.

On the real economy, May’s Industrial Production retakes the negative trend of February and March, after industrial production had risen 4.0%yoy in April. May’s IP declined 0.2%yoy (-2.2%mom) according to the National Statistics Institute. Though IP is very volatile, these numbers contribute to some uncertainty behind activity data in Q2 2014 in Portugal. Energy production declined yoy but rose 7.6%mom. This turnover in the energy sector may be justified by the restart of production in the closed Galp oil refinery in the beginning of May.

According to the Eurostat, the unemployment rate in Portugal fell again in May to 14.3% of the labor force, after 14.6% in April. This represents a large fall compared to the 16.9% level recorded last year. Youth unemployment (under 25 years old) had significantly decreased from 39% in May 2013 to 34.8% in 2014. In the EA, the unemployment rate was 11.6% in May, a decline of 0.4 pp when compared to May of last year (12.0%) and flat relative to April.
WEEK AHEAD 7 July – 11 July

9 July

  • Portuguese Investment Survey  (1st semester, National Statistics): The recovery in investment is crucial to boost the economy. The survey regarding the first half of 2014 may shed some light on the main difficulties felt by entrepreneurs in investing more and eventually help policymaking on this issue.

10 July

  • Portuguese CPI (June, National Statistics): June’s CPI will provide further data on whether deflation is in fact materializing in Portugal.
  • Portuguese International Trade in goods (May, National Statistics): After the decline both in exports and imports of goods revealed in April’s data and the negative contribution from net exports in Q1 2014, May’s data may be important to provide a first glance at the direction of net exports’ contribution to Q2 GDP.