Euro-area inflation held steady last month and exports rebounded in August as European leaders struggled to contain the region’s fiscal crisis.
The inflation rate in the 17-member currency region remained at 2.6 percent from a year ago, the European Union’s statistics office in Luxembourg said today. It had previously reported an annual gain of 2.7 percent. Euro-area exports rose 3.7 percent from July, when they fell 2.2 percent, a separate report showed.
Crude oil prices have increased about 9.4 percent since mid-June, eroding the purchasing power of companies and households and undermining a return to growth. With the global economy “awfully close” to recession, in the words of Bank of Israel Governor Stanley Fischer, European leaders meeting in Brussels later this week are under pressure to shore up economic growth and plug budget gaps across the region.
“There’s no tailwind for the economy from oil prices as could have been hoped for,” said Christian Melzer, an economist at Dekabank in Frankfurt. “We expect the euro region to remain in recession this year with negative growth rates both in the third and fourth quarters as well. The problems of the fiscal crisis are simply too big.”
The euro traded at $1.3001 at 10:19 a.m. in Brussels, up 0.4 percent on the day.
Euro-area consumer prices rose 0.7 percent from the previous month, when they increased 0.4 percent, the statistics office said. In the 27-nation EU, inflation remained at 2.7 percent.
Rising commodity costs have piled pressure on companies and households already struggling with the impact of the region’s fiscal crisis as governments from Ireland to Spain cut spending to meet budget targets. Crude oil traded at $91.87 a barrel today, little changed on the day.
The core inflation rate, excluding volatile costs such as energy, alcohol and tobacco, held at 1.5 percent in September. Economists in a Bloomberg News survey had forecast an increase to 1.6 percent, the median of 25 estimates showed.
The economy probably continued to shrink in the third quarter after contracting 0.2 percent in the previous three months, putting the economy into a recession. Euro-area manufacturing and service industries continued to shrink in September and economic confidence unexpectedly declined.
The European Central Bank on Sept. 6 forecast euro-area inflation to average about 2.5 percent this year and 1.9 percent in 2013, up from a June estimate of 2.4 percent and 1.6 percent for this year and next, respectively. The economy may shrink 0.4 percent this year, the central bank said.
The International Monetary Fund this month said the world economy will grow 3.3 percent this year, the weakest pace since the 2009 recession, with “alarmingly high” risks of a steeper slowdown. Fischer told Bloomberg Television on Oct. 13 that while European governments are “moving ahead,” the economy “is technically in a recession.”
The euro-area’s unadjusted trade surplus narrowed to 6.6 billion euros ($8.6 billion) in August from 14.7 billion euros in the previous month, today’s report showed. Imports rose 2.1 percent in August from July, when adjusted for seasonal swings.
Euro-area exports to the U.S. rose a non-seasonally adjusted 14 percent in the first seven months from a year ago, while shipments to the U.K. advanced 8 percent. Exports to China and Russia rose 10 percent and 17 percent, respectively. Detailed trade data are published with a one-month lag.
Still, Bundesbank President Jens Weidmann said on Oct. 12 that while the global economy is in a “difficult situation,” there’s no reason for pessimism on the economic outlook.
“The adjustment process in Europe has started,” he said. “But this process is only at the beginning.”