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Article / 31 July 2017 at 5:00 GMT

3 Numbers: Eurozone inflation expected to hold steady in July

editor/analyst /
United States
  • Economists project consumer inflation in the euro area will hold steady in July
  • Eurozone’s jobless rate in June on track to inch down to eight-year low
  • Analysts seek first rise in US Pending Home Sales Index in four months

By James Picerno

July ends with a busy day of economic news, including a couple of key updates for the Eurozone: the monthly numbers on consumer inflation and the unemployment rate for June. Later, the US housing market is in focus with the June report of the Pending Home Sales Index.

 Eurozone's inflation is expected to remain steady at 1.3% in the year to July. Photo: Shutterstock

Eurozone: Consumer Price Index (0900 GMT) Inflation’s pace has eased in recent months, pulling back after accelerating in the first quarter. But the softer trend is expected to stabilise in today’s flash data for July.’s consensus forecast calls for headline inflation to remain steady at a 1.3% year-on-year increase. If the projection is right, the news will offer fresh support for the European Central Bank’s reluctance to begin tightening monetary policy.

Earlier in the year the ECB came under pressure to start lifting its 0% interest rate policy, courtesy of rising inflation that looked set to move above the central bank’s target of just under 2%. The high point was in January, when headline CPI reached 2.0%.

Pricing pressure has been easing ever since, although today’s preliminary data for July is expected to reflect stability, albeit at a rate well below the central bank’s target. If so, the ECB will have a new reason to leave policy unchanged for the near term and delay any plans to begin paring the bank’s €60bn-a-month quantitative-easing program of bond buying

The International Monetary Fund last week advised the ECB against prematurely winding down monetary stimulus without clear signs that inflation is trending higher. Inflation, the IMF forecasts, won’t reach the ECB’s target on a sustainable basis until 2020. Today’s CPI report is expected to provide support for that outlook.

Eurozone: Unemployment Rate (0900 GMT) Inflation may remain well below the European Central Bank’s target for the foreseeable future, but the recent rebound in economic activity for the euro area rolls on.

Last week’s estimate of Eurozone GDP growth through June perked up to a 0.63% quarterly pace, according to the Euro-Coin Indicator, a GDP proxy published by the Bank of Italy. The estimate suggests that tomorrow’s official second-quarter GDP report will reflect a slightly faster growth rate over Q1’s 0.5% increase.

Survey data published by IHS Markit also points to a 0.6% pace for Q2, based on last week’s flash data for the Eurozone Composite Output Index.

Today’s unemployment report for June is expected to deliver a new reason for thinking positively. The jobless rate is projected to tick down to 9.2%. 

Although that’s still elevated compared with the US, Europe’s unemployment has been gradually sliding over the past year. If today’s estimate is correct, the ranks of the unemployed will slip to a new eight-year low, a sign that the improvement in economic growth so far this year will continue in 2017’s second half.

US: Pending Home Sales Index (1400 GMT) Economic growth rebounded in the second quarter, according to Friday’s GDP report. Output increased 2.6%, a solid improvement over Q1’s sluggish 1.2% advance.

Driving the firmer pace of economic activity: consumer spending, which increased 2.8% – the best pace since last year’s Q3. Housing, by contrast, was a drag on GDP in Q2. Residential fixed investment slumped 6.8%, down sharply from the strong 11.1% advance in Q1.

Monthly housing indicators have been relatively soft as well. Existing home sales, for instance, dipped to a four-month low in June. Although activity picked up last month for new residential construction, the number of housing starts remains well below its post-recession peak that was set last October.

An early clue for deciding if housing activity will improve in the months ahead arrives in today’s Pending Homes Sales Index for June. The benchmark, considered a leading indicator for housing sales, will be widely read as the crowd focuses on the economic outlook for Q3.

Analysts are expecting a bit of good news: the pending sales data is set to post its first improvement in four months.’s consensus forecast sees a mildly firmer reading for June with a 0.9% increase from May. 

That still leaves pending sales at a middling level relative to numbers published so far this year, but the estimate for today's release suggests that the housing market may be stabilising after a mixed run in 2017's first half.

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– Edited by Gayle Bryant

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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