Digesting the data out of Europe this morning

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(Kitco News) – There has been a huge amount of data this morning across the major nations in Europe. First up was the U.K where analysts received the news that in Q1 the drop in GDP was deeper than reported in the initial flash estimate. The figure came in at -1.6% when -1.5% was expected. It was not all bad news as households increased their savings sharply at the beginning of the year as the third coronavirus lockdown closed pubs, restaurants, and shops. The UK’s savings ratio rose to 19.9 percent from 16.1 percent in the fourth quarter of 2020. This is the second-highest savings ratio on record after a leap to 25.9 percent between April and June last year during the first lockdown, according to the Office for National Statistics.

In mainland Europe, the next major piece of news came from Germany. The unemployment change for the month of June came in at -38K but the main unemployment rate stayed at 5.9%. This means the number of unemployed has now almost returned to its pre-crisis level. The reduction in lockdown measures has clearly boosted labour market developments. ING Bank noted “Looking ahead, for the German labour market, the worst seems to be over. Employment expectations in both the manufacturing and services sector have continued to improve and are approaching all-time highs quickly. With improving employment prospects and the expected strong rebound of the economy, the risk of bankruptcies and a potential second unemployment wave are decreasing.”.
Lastly, EU CPI reached 1.9% just under the 2% target range for the ECB. Eurostat noted, “Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in June (12.5%, compared with 13.1% in May), followed by non-energy industrial goods (1.2%, compared with 0.7% in May), services (0.7%, compared with 1.1% in May) and food, alcohol & tobacco (0.6%, compared with 0.5% in May).”. Tomorrow we could hear from ECB president Christine Lagarde at the Hearing before the Committee on Economic and Monetary Affairs. She may shed some light on the current developments but the ECB seem content about where they are with monetary policy with no real mention of a move in rates or tapering unlike some of the other major central banks.
U.K.  GDP (QoQ) (Q1) -1.6% vs exp -1.5% prev 1.3%
German Unemployment Change (Jun) -38K vs exp -20K prev -19K
German Unemployment Rate (Jun) 5.9% vs exp 5.9% prev 5.9%

EU CPI (YoY) (Jun) 1.9% vs exp 1.9% prev 2.0%

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