Aurelia Butler

The number of unemployed people in the eurozone fell below 11mn for the first time, or an all-time low of 6.6 per cent of the workforce, underlining the resilience of the bloc’s labour market despite the energy crisis caused by Russia’s invasion of Ukraine. The official count of jobless people in the 19-country bloc dropped by 77,000 in July, according to data published by the European Commission’s statistics unit on Thursday. The bloc’s unemployment rate stood at 6.7 per cent in June. In the wider EU, the number of unemployed people fell 113,000 in July, taking it below 13mn for the first time and its jobless rate to a new low of 6 per cent.The strength of the eurozone labour market and the subsequent risk that wages will rise sharply have been cited by several European Central Bank policymakers as a reason for seeking to accelerate the pace of interest rate rises with a 0.75 percentage point move next week. “Against the backdrop of record high inflation and record low unemployment, the ECB at its meeting next week will see little reason to hold back on policy tightening,” said Jessica Hinds, an economist at research group Capital Economics.Dutch central bank governor Klaas Knot, who sits on the ECB governing council, said he visited six eurozone countries in his summer holidays, “and in almost every shop I went into in all these countries there were signs saying ‘we’re hiring’ or ‘staff needed’.”“This should be quite some concern on the back of the persistent inflation we are seeing,” said Knot, who has called for the ECB to discuss speeding up rate increases to curb inflation.ECB executive board member Isabel Schnabel told the Jackson Hole meeting of central bankers last weekend that “tight labour markets” were one of the “significant risks” that “threaten to feed an inflationary process that is becoming harder to control the more hesitantly we act on it”.However, Hinds said the latest fall in eurozone jobless numbers was “likely to be as good as it gets”. “The region faces a difficult winter and recession looms. So the jobless rate is likely to rise from here, even if short-time working schemes cushion the blow,” she added.In response to record eurozone inflation, unions are demanding higher pay and several governments are increasing minimum wages sharply. Meanwhile, workers in some countries, such as Belgium, have indexation agreements linking pay to inflation. Paul Hollingsworth, senior European economist at French bank BNP Paribas, said: “There is evidence that firms are having to pay over-and-above the negotiated wage — eg via bonuses, to attract and retain workers given the tightness of the labour market.”Yet, so far, there have been few signs of a wage-price spiral taking hold in the eurozone. The ECB’s tracker of negotiated wage growth in the eurozone showed it slowed to 2.14 per cent in the second quarter, down from 2.84 per cent in the first quarter. More

LONDON (Reuters) – British businesses have increasingly high expectations for inflation and wage costs over the coming year, according to a Bank of England survey which is likely to boost policymakers’ concerns that it will be hard to get inflation back to target.Last month the Bank of England raised interest rates by half a percentage point – its biggest increase since 1995 – and said it would “act forcefully” if it saw risks that inflation pressures were becoming persistent.Consumer price inflation hit a 40-year high of 10.1% in July and the BoE forecast it will peak above 13% in October.Financial markets expect another half-point rate rise from the BoE this month – which would take Bank Rate to 2.25% – and see a 29% chance of a 75-basis-point rise which would be the biggest rise since 1989.The BoE pays particularly close attention to its monthly Decision Maker Panel survey of chief financial officers at British businesses with a range of sizes.Thursday’s release showed businesses expect consumer price inflation in a year’s time to be 8.4%, up from a forecast of 7.3% in July’s survey. Expectations for inflation in three years were also well above the BoE’s 2% target at 4.2%.Businesses plan to raise their own prices by an average of 6.4% over the next 12 months – down slightly from 6.7% in July, which was the highest in more than five years – while they intend to raise employees’ wages by 5.5%, up from 5.2%.Wages had risen by an average of 6.4% over the past 12 months, the survey showed.The results from the BoE survey match the trend in a broader survey of households released on Wednesday by U.S. bank Citi and polling company YouGov, which showed inflation expectations for five to 10 years’ time hit a record high of 4.8%.However, there was some evidence of easing price pressure in parts of the economy in S&P Global (NYSE:SPGI)’s monthly manufacturing Purchasing Managers’ Index. Manufacturers’ overall input costs – which include wages and raw materials – rose at the slowest pace since November 2020, despite surging energy bills, while prices charged rose by the least since March 2021. More

LISBON (Reuters) -European policymakers should avoid taking rushed pro-cyclical measures in response to high inflation, which is expected to slow down over time and converge with European Central Bank targets, ECB Governing Council member Mario Centeno said on Thursday.Pro-cyclical policies tend to reinforce the existing conditions facing an economy be it economic growth or recession.”We should be worried and act – as consumers and policymakers – about the inflation numbers we’ve seen. But we also have to remember the need to think longer-term in these processes…and we should be guided by patience.””Pro-cyclical policies are all we should avoid”, he said, adding there is a need for greater coordination of national policies, but also at the European level.Governments usually increase spending and lower taxes during a recession, which many fear is looming now due to high inflation. But central banks are currently raising interest rates to combat high inflation, action that can magnify economic downturns.With euro zone inflation at record levels, policymakers are concerned that even long-term inflation expectations may move above the ECB’s 2% target.Still, Centeno said that “the forecast of all institutions, including the Bank of Portugal, is that inflation will decelerate and will gradually return – probably more gradually than we wanted – to levels consistent with the ECB’s objectives.”Official data published on Wednesday showed that inflation in the 19 countries sharing the euro currency accelerated to 9.1% in August year-on-year from 8.9% a month earlier.The ECB is expected to face a choice at its policy-setting meeting next week between a rate rise of around 50 and 75 basis points. The ECB raised rates by 50 basis points to zero percent in July. More

It adjusted its forecast for passenger car deliveries in the U.S. to predict a 7% drop this year, from a previous forecast of a 1% drop.In Europe, it said it expected deliveries to fall 4%, from a previous forecast of no change.In China, by contrast, where the recovery from pandemic-related lockdowns was progressing faster than expected, it forecast 9% growth compared with a previous forecast of 3%.Globally, the association continues to expect no change from last year’s deliveries, which totalled 71.4 million vehicles – still 9.2 million below the industry’s output in 2019 before the pandemic. More

HELSINKI (Reuters) -Finland on Thursday slashed value-added tax on electricity to 10% from 24% over the winter and said it would pay more subsidies to those struggling with rising bills and inflation, as Europe struggles with soaring electricity costs.The measures led the government to raise its 2023 fiscal spending forecast compared with one month ago, abandoning a goal of tightening public spending after the pandemic in order to ease inflation struggles.”We live in a war-time economy,” Prime Minister Sanna Marin told reporters, referring to the war in Ukraine and its negative implications for European economies.”We see already now that around Europe calls are intensifying for peace at any price because every household can feel this situation in their own pockets,” she said.A significant proportion of Finnish households use electricity to heat their houses during the cold Nordic winter months, and the government said it would seek to compensate rising prices by lowering the value-added tax on electricity to 10% from December to April.The cost of the measures, which include electricity bill-based deductions on income tax or a direct subsidy for low-income groups, will amount to roughly 800 million euros in next year’s budget.The government has proposed public spending of 80.5 billion euros ($80.6 billion) for 2023, up from 79.5 billion suggested by the finance ministry a month ago.The budget deficit for next year is now seen at 8.1 billion euros instead of the 6.3 billion planned originally.”The good economic growth we still had at hand in the beginning of the year now threatens to slow down significantly next year,” Finance Minister Annika Saarikko told a news conference.She added that the economic distress could become deeper than estimated and even result in a recession.($1 = 0.9985 euros) More

SANTIAGO (Reuters) – Chile is expected to raise its benchmark interest rate this month to 10.5% from 9.75%, a central bank poll of traders showed on Thursday, as the world’s top copper producer tries to rein in high inflation.The Andean country’s central bank raised its benchmark interest rate by 75 basis points at its July meeting. Traders also expect inflation to rise by 1% this month. More