Global| Jun 03 2003Continuing Weak Data from the Euro-zone Suggest a Reduction in the ECB's Benchmark Interest Rate
Summary
Indications are rising that the European Central Bank may reduce its benchmark interest rate at its next meeting on June 5th. The rate was last reduced in March to 2.5% from 2.75% and compares with the U.S. benchmark rate of 1.25% The [...]
Indications are rising that the European Central Bank may reduce its benchmark interest rate at its next meeting on June 5th. The rate was last reduced in March to 2.5% from 2.75% and compares with the U.S. benchmark rate of 1.25% The data on activity and the mood of consumers and businessmen released since March have generally been on the disappointing side.
Gross domestic product for the area increased a mere one hundredth of one percent in the first quarter of this year. The unemployment rate for April released today remains at 8.8%. Confidence among consumers and business men remains at low levels. In May, the percentage of consumers with a pessimistic outlook outweighed the optimists by 20%, compared with 19% in April. Among businessmen in the manufacturing sector, the pessimists outweighed the optimists by 13%. The manufacturers have also become more pessimistic about export orders, price expectations and recent production trends. Finally, for the first time since June 2001, the flash estimate for the harmonized consumer price index in May fell below 2%, the ECB's inflation limit.
| Euro-zone Prices | May03 | Apr03 | Mar03 | 2002 | 2001 | 2000 |
|---|---|---|---|---|---|---|
| Harmonized CPI | -- | 2.07% | 2.45% | 2.25% | 2.34% | 2.10% |
| CPI Flash Estimate | 1.90% | 2.10% | 2.40% | -- | -- | -- |
| -- | -- | -- | -- | -- | -- | -- |
| Confidence (Positive less Negative) | -- | --- | -- | -- | -- | -- |
| Consumer | -20 | -19 | -21 | -11 | -5 | 1 |
| Industrial confidence | -13 | -12 | -12 | -11 | -8 | 5 |
| Volume of export order book | -27 | -25 | -24 | -22 | -14 | 1 |
| Price expectations | -4 | -1 | 4 | 0 | 3 | 14 |
| Recent production trends | -10 | -6 | -12 | -9 | -3 | 12 |
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