Ole Hansen
The Russian and Saudi energy ministers met ahead of Opec’s late-November deal, but Saxo Bank head of commodity strategy Ole Hansen says the future for oil remains cloudy.
Article / 30 June 2016 at 5:00 GMT

3 Numbers: Eurozone annual inflation on track to tick up to zero

editor/analyst /
United States
  • Today’s Euro-Coin update offers a new estimate of Eurozone GDP for June
  • The Euro-Coin estimate will offer fresh insight into Europe’s macro trend
  • Eurozone consumer inflation should be unchanged in June in year-on-year terms
  • US jobless claims may show signs of a rebound in employment growth

By James Picerno

Thursday’s a busy day for economic news, including a big-picture update on the macro trend for the Eurozone via the Bank of Italy’s Euro-Coin Indicator. Later, we’ll see the flash estimate for the euro area's consumer price inflation in June, followed by the weekly update for US jobless claims.

Eurozone: Euro-Coin Indicator (0730 GMT) How’s the big-picture outlook for Eurozone GDP faring in the wake of last week’s regime-shifting Brexit vote? It’s too early to say, but today’s monthly update on the Euro-Coin Indicator may drop a clue about what’s coming.

 Stubbornly low and even negative headline inflation releases for the Eurozone are worrying, but the good news is that core inflation is posting an 0.8% rise in annual terms. Photo: iStock

Today’s June estimate for GDP won’t reflect a post-Brexit world, but the numbers will offer fresh insight into Europe’s macro trend, albeit before last Friday’s referendum vote in the UK unleashed political and perhaps economic upheaval on both sides of the English Channel.

Even before Brexit, there were signs that Eurozone’s already modest growth rate was slipping... again. The Euro-Coin Indicator, a GDP proxy for output in the euro area, decelerated for the third month in a row in May to a quarterly rise of 0.26%—roughly half the rate from earlier in the year.

Corroboration for the slowdown can be found in other sources. Last week’s flash estimate for the Eurozone Composite Output Index slipped to a 17-month low, for instance. “The second quarter is therefore likely to see economic growth slacken from the solid 0.6% expansion seen in the opening quarter of the year to around 0.3%,” said Markit’s chief economist.

That’s in line with the Eurozone growth rate that is currently projecting for Q2 GDP. In other words, analysts were already expecting—before the UK voted to leave the European Union—that growth in the euro area would be cut in half in the April-through-June period relative to the Q1 advance.

The PMI and data suggest that today’s June reading for the Euro-Coin Indicator will remain at or close to last month’s weak 0.26% rise. If so, the evidence will mount that the Eurozone suffers from a diminished tailwind as it heads into the second half of 2016.

Eurozone: Consumer Price Index (0900 GMT) European Central Bank president Mario Draghi earlier this week pressed the world’s major central banks to enhance coordination for monetary policy. “In a globalised world, the global policy mix matters — and will likely matter more as our economies become more integrated,” he said. “So we have to think not just about whether our domestic monetary policies are appropriate, but whether they are properly aligned across jurisdictions.”

Draghi went on to say that a coordinated effort would help raise and stabilise inflation faster “if the overall policy mix is consistent.”

It remains to be seen how much coordination will follow, but today’s flash data on Eurozone inflation will serve as a reminder that Europe still has a long road ahead to lift the consumer price trend close to the ECB’s target of just below 2%. It's not obvious that global coordination in monetary policy would help, but whatever the solution, there's not a lot of evidence that the ECB is winning this war.

Headline inflation on a year-over-year basis was slightly negative in May for the second straight month. In fact, consumer prices have been flat or lower in annual terms since February. Today’s flash report for June is expected to offer more of the same, albeit with a slight uptick to zero vs. the year-earlier level, according to’s consensus forecast.

The good news is that core inflation, which is arguably a more reliable measure of inflation, is moderately higher, posting an 0.8% rise in annual terms. But that's a thin wall between something approximating normal inflation and a deeper level of deflation.In any case, if the modestly positive core rate of inflation gives way, the ECB will need more than tighter coordination among central banks to keep deflation risk from accelerating.

US: Initial Jobless Claims (1230 GMT) Recent updates for new unemployment filings suggest that the sharp slowdown in job growth in May is due for a recovery in some degree in the June employment report. All eyes will be on today’s weekly update on jobless claims for another round of what’s expected to be upbeat news.

Although claims are projected to rise by 7,000 to a seasonally adjusted 266,000, according to’s consensus forecast, that’s still close to a multi-decade low. If the wisdom of the crowd is correct, today’s report will support the view that the worrisome slide in job growth last month was a one-off event.

“This data continue to point to a labour market that continues to be pretty solid,” said the chief financial economist at Jefferies last week in reference to the claims data. “The weekly labour market data right now isn’t really fitting with the monthly labor market data, but I expect that over the next few months we’ll see a return to trend” in payrolls.

Today’s numbers aren’t expected to break from that view. Of course, in the current climate, with Brexit jitters still reverberating around the world, this would be an ill-timed moment for an upside spike in claims. Impossible? No, but highly unlikely, according to the best guesses of dismal scientists.
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– Edited by Robert Ryan

James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


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