Data published by European statistics office Eurostat showed that eurozone inflation rose at the fastest annual rate in more than three years during December due to a rise in energy and food prices. Inflation rose to 1.1 per cent in December, the highest level since September 2013 and a pick-up in the annual rate of inflation from 0.6 per cent in November.
Inflation exceeded expectations of a one per cent rise. Notwithstanding this, headline inflation was less than the European Central Bank’s target of ‘below, but close to two per cent’ inflation. Simultaneously, core inflation, that is, excluding energy, food, alcohol and tobacco, rose marginally from 0.8 per cent to 0.9 per cent. Energy prices rose by 2.5 per cent, reversing a 1.1 per cent decline in November, and food price inflation advanced to 1.2 per cent from 0.7 per cent.
In the meantime, German unemployment extended its decline in December amid signs that growth in Europe’s largest economy accelerated at the end of last year. Data from the Federal Labour Agency in Nüremberg showed that the number of unemployed people fell by 17,000 in December following a revised decline of 6,000 in the previous month, which was initially reported as a decline of 5,000.
In December, the number of unemployed totalled 2,638,000. The jobless rate held steady at six per cent in December, the lowest level since Germany’s reunification. The number of jobless people fell, even though that the labour market had to absorb 425,000 migrants who registered as job seekers in December.
Finally, in the US, the minutes of the Federal Reserve’s (Fed) December meeting published last week revealed that Fed officials discussed the impact of President-elect Donald Trump’s proposed economic programme of tax cuts, deregulation and increased infrastructure spending, which may trigger inflation.
The minutes show that Fed officials could retain plans for gradual rate hikes but would need to be prepared to increase rates at a faster pace to fight inflation. The minutes said: “Almost all (participants)... indicated that the upside risks to their forecasts for economic growth had increased as a result of prospects for more expansionary fiscal policies in coming years”.
This report was compiled by Bank of Valletta plc for general information purposes only.