Week in Review & Week Ahead


In August, inflation in the Euro area was 0.4%yoy, unchanged compared to July, and down from 1.3%yoy in August 2013. Core inflation, excluding oil and processed food prices was 0.9%, up from 0.8% in July

It is unlikely that ECB’s actions in the summer will have an immediate impact on inflation, particularly as part of the decline is due to international oil prices. Moreover, the first targeted LTRO, i.e., a four-year maturity operation based on banks’ actual lending, had a relatively low rate of participation, with banks taking up only EUR83bn out of 400bn available. Nevertheless the ECB hopes that its actions will be able to lift inflation expectations that remain below the ECB target of close to but below 2%.


Fed Chair Janet Yellen stressed the risk that the slow growth and low inflation in Europe represent for the rest of the world. Yellen was speaking in the press conference following Fed’s meeting on interest rate policy: the Fed announced it will keep interest rates low, close to 0%, for a considerable period of time after the quantitative easing programme is over. After the Fed’s meeting, markets reacted positively with the main stock exchanges accumulating further gains.

Nominal hourly labor costs grew 1.2%yoy in the Eurozone in Q2 2014, after 0.6%yoy in Q1. In Portugal, labor costs rose 3.1%yoy in Q2 after -1.4% in Q1. This rise in Portugal was driven by the non-business economy (10.3%yoy, after -8.2%yoy in Q1), as holiday pay was reinstated in the public sector following a Constitutional Court ruling. The business economy labour costs were down 1.9%yoy after + 3.4%yoy in Q1.



The week ahead is short on relevant economic data.

22nd September: The President of the ECB Mario Draghi speaks to the EU Parliament Committee in Brussels

23rd September (Markit): The flash Eurozone composite PMI for September will be released. After disappointing Q2 growth in the Eurozone, August’s PMI was pointing to better growth perspectives, though slightly down from July’s numbers. The index zero-growth threshold is 50.