Forex »

Fall In Eurozone PPI

James Boston
Share on StockTwits
Published on
www.finances.com
Fall In Eurozone PPI

Eurostat has just released the Eurozone’s Producer Price Index (PPI) data for the month of July. Year on year the PPI index has fallen –1.1%, this is in comparison to the prior month’s -0.8% reading and a market consensus estimate for the -1.1% fall experienced today. On a month on month basis the PPI now reads at –0.1% compared to 0.1% expansion in June and an expectation for the -0.1% fall in these July figures.

European stock markets have risen for three straight days ahead of this Thursday’s European Central Bank (ECB) policy announcement. It is widely anticipated that the ECB can no longer hold off on the announcement of a quantitative easing program. Yesterday’s manufacturing data from across the Eurozone significantly disappointed markets for a second consecutive month. This sluggishness in industrial activity bodes very poorly for Q3 GDP growth, following two disappointing GDP recordings in both the first and second quarter of this year it was hoped that growth would pick up in the last six months of the year. This is looking more and more unlikely and when taken in conjunction with the persistent reluctance of price growth to take off and the glacial rate of improvements in the employment market there is really no other course of action open to the ECB other than to turn on the liquidity tap.

The unknown aspect of this week’s policy announcement is whether the Bank will provide details of the timing and magnitude of the quantitative easing program or whether it will just be an official announcement that such a course of action is imminent. The most likely scenario is that it will be the latter, appeasing markets with the promise of a quantitative easing program before the end of the year. There are simply too many legal and technical aspects for the ECB to address before a final package can be arrived at.

Share on StockTwits