German inflation edged up in February while the number of jobless people fell by more than expected, offering a boost to the eurozone’s stuttering economy before the advent of coronavirus threatened to pose a further drag on growth.
Germany’s harmonised inflation rose to 1.7 per cent in February from 1.6 per cent the month before, according to official national statistics — the fastest rate of expansion since March last year and the fourth consecutive monthly increase. Inflation rose despite a slowdown in energy prices, as food prices increased by 3.3 per cent, up 1 percentage point on the previous month.
“These headlines are stronger than we expected,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. “The underlying trend in core [inflation] is just over 1.6 per cent and it should increase a bit in the next three to six months.”
Germany’s labour market was also strong with 10,000 fewer jobless in February than the month before; analysts had expected a 3,000 rise after the economy stagnated in the final quarter of last year.
Germany’s unemployment rate was unchanged at 5.5 per cent, just above the two-decade low it hit last year.
“A slight increase in inflation and a strong labour market is exactly what the European Central Bank loves to see,” said Carsten Brzeski, chief economist at ING Germany.
However Friday’s data are “probably the last pre-coronavirus data for the German economy”, he warned.
Portugal also reported upbeat economic news on Friday, with better than expected annual economic growth for 2019.
Portugal’s National Statistics Institute (INE) said the former bailout country’s economy grew by 2.2 per cent in 2019, outstripping forecasts by the government, the European Commission, the IMF and the OECD club of mostly rich nations. Portuguese growth is running above the eurozone average, which sits at 1.1 per cent.
The INE revised the flash forecast it made two weeks ago upwards, lifting its estimate of last year’s gross domestic product growth from 2 per cent to 2.2 per cent. This reflects new balance of payments data for 2018 and 2019, the INE said. It also revised Portugal’s 2018 GDP growth upwards by 0.2 points to 2.6 per cent.
However the latest data indicators in France and Italy offered a less encouraging picture.
France’s household consumption dropped by 1.1 per cent in January compared with the previous month, driven by a sharp contraction in real spending on cars.
Meanwhile growth figures published on Friday confirmed that the French economy contracted by 0.1 per cent in the last quarter.
When taken in conjunction with the household consumption figures it raises “concerns that the economy has entered a period of weak growth after recent impressive resilience”, said Maddalena Martini, economist at Oxford Economics.
In addition, lower energy prices also slowed French and Italian inflation by 0.1 percentage points, to 1.4 per cent and 0.4 per cent respectively.
Italy is facing a technical recession as the economic impact of coronavirus adds to its pre-existing slowdown; Italy’s economy contracted by 0.3 per cent in the final quarter of 2019.
“The surge in coronavirus cases in Italy will be a hard blow for the Italian economy and poses risks for the broader euro area,” said Angel Talavera, economist at Oxford Economics.
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