February’s rise in eurozone unemployment to another record high is further confirmation of the underlying weakness of the economy.
Meanwhile, the European Central Bank kept the interest rate on hold as March’s eurozone Consumer Price Index figures revealed a further fall in the headline inflation rate from 1.8 per cent to 1.7 per cent, the lowest rate since 2010.
The drop was driven by a sharp fall in energy inflation, which was partially offset by a rise in both core goods inflation (one per cent vs 0.8 per cent) and services inflation (1.9 per cent vs 1.5 per cent).
These increases might fuel speculation that underlying price pressures in the currency union are starting to pick up again, perhaps in response to faster wage growth in some countries and the inflationary effects of the recent falls in the euro.
In the US, the biggest surprise among the surveys issued last week was the fall in the Institute for Supply Management non-manufacturing index. The index fell to 54.4 in March from 56 in February.
Jobless claims rose by 28,000 to 385,000 last week, the highest since November 24. But it is unlikely that this is the beginning of a trend as other US data was more positive.
The Markit manufacturing Purchasing Managers’ Index, which is incorporated in the global manufacturing index, increased in March and suggests that output is growing rapidly.
Moreover, household consumption picked up in January and February, despite the rise in gasoline prices and effects of the fiscal cliff.
In a shocking decision in an attempt to end nearly two decades of deflation, the Bank of Japan announced a radical overhaul of its policymaking, adopting a new balance sheet target and pledging to double its government bond holdings in two years.
The decision marks a return to the Bank of Japan’s five-year quantitative easing policy that ended in 2006, when it flooded markets with cash, targeting excess reserves that financial institutions parked with the central bank.
The decision drove the yen down sharply and knocked the 10-year bond yield to a record low.
This article was compiled by Bank of Valletta plc for general information purposes only.