JAKARTA (TheInsiderStories) – Eurozone inflation edged higher in line with expectations in February as food and energy price rises accelerated. But there was no matching increase to the core rate that the European Central Bank (ECB) closely watches.

The European Union’s statistics agency Eurostat estimated that prices in the 19-country currency bloc rose 1.5 percent in February, from the 1.4 percent reported for January. The increase brings headline inflation nearer to, but still some way off the ECB’ target of below, but close to 2 percent.

The core indicator that plays a key role in the ECB’ monetary policy decisions, and which excludes volatile energy and unprocessed food prices, was unchanged at 1.2 percent in February, above expectations of a fall to 1.1 percent.

A narrower indicator, which excludes energy, food, alcohol and tobacco and on which economists often focus, dipped to 1.0 percent, compared to expectations of an unchanged 1.1 percent reading. Headline inflation increased mostly because of energy prices, which rose 3.5 percent year-on-year in February, after a 2.7 percent increase reported for January. Unprocessed food prices were also 2.9 percent higher than a year earlier, far greater than the 1.8 percent increase in January.

Eurostat also reported that the unemployment rate in the Eurozone was 7.8 percent in January, unchanged from a revised figure a month earlier, although there were 23,000 fewer people unemployed than in December.

The 7.8 percent reading was the lowest since October 2008. December’s number had previously been estimated at 7.9 percent.

While, the Eurozone manufacturing sector fell to 49.3 percent in February 2019, little-changed from a preliminary estimate of 49.2 percent below the previous month’s final 50.5 percent and slightly above market expectations of 49.2 percent.

The latest reading pointed to the steepest contraction in the manufacturing sector since June 2013, as new orders dropped to the fastest rate since April 2013 with export orders declining to the greatest extend for over six years. Also, backlogs of work decreased for the sixth consecutive while employment rose at solid pace.

On the price front, input prices rose at the softest pace since October 2016, mainly due to lower cost of oil-based products. Finally, business confidence deteriorated amid the deepening downturn in new work, concerns over domestic political and international trade developments.

Among Eurozone’ largest economies, Germany’ Purchasing Manufacturing Index (PMI) shrank the most in over six years while French activity grew the most in five months. Germany’ PMI was confirmed at 47.6 percent in February 2019, below January’s 49.7 percent, pointing to the second successive monthly contraction in manufacturing and the steepest since December 2012.

Output decreased for the first time since April 2013 and at the quickest rate in over six years; and new orders posted the steepest fall for six-and-a-half years, with new business from abroad dropping the most since October 2012 amid falling car sales, weaker demand from Asia (particularly China), Brexit anxiety among clients and growing competition.

Stocks of purchases also declined and input lead times decreased for the first time in almost three years. On the other hand, employment continued to grow at a solid pace. On the price front, average input costs rose the least since October 2016.

Meanwhile, France increased to 51.5 percent in February of 2019 from 51.2 percent in the previous month and slightly higher than earlier estimates of 51.4 percent. The reading pointed to the strongest expansion in factory activity since September of 2018, as new export orders grew for the first time in four months.

Job creation went up for the second month but at a softer pace compared to January. On the other hand, new export orders fell for the sixth straight month mainly due to weak demand from the automotive sector.

On the price front, input cost inflation softened to a 19-month low in February while output charges increasing solidly and at a quicker rate than in January. Finally, sentiment among French manufacturers towards the business outlook remained optimistic despite sentiment falling slightly in February.

On the other hand, United Kingdom fell to a four-month low of 52 percent in February 2019 from a downwardly revised 52.6 percent in the previous month, in line with market consensus.

New order inflows nearly stagnated, amid signs of a slowing domestic market and a further drop in new export orders. Meanwhile, purchasing activity was scaled-up to stockpile raw materials, leading to a survey-record expansion in input inventories due mainly to preparations to mitigate Brexit uncertainty.

In addition, the rate of job losses was the steepest since February 2013 and business optimism regarding future output fell to its lowest level in the series history. On the price front, input cost inflation was the lowest since April 2016 while selling prices increased at a faster rate.

Meantime, annual core Personal Consumption Expenditures (PCE) Price Index of United States (US) stays unchanged at 1.9 percent in December. The data published by the US Bureau of Economic Analysis stated that the PCE Price Index increased 0.1 percent on a monthly basis. Meanwhile, core PCE, the Federal Reserves preferred gauge of inflation, rose 0.2 percent and 1.9 percent on a monthly and yearly basis, respectively, to match analysts’ estimates.

The data shows that personal income increased $179.0 billion (1.0 percent) in December, but decreased $23.8 billion (-0.1 percent) in January.

While personal outlays decreased $71.3 billion in December. Personal saving rose to $1.21 trillion in December and the personal saving rate, personal saving as a percentage of disposable personal income, was 7.6 percent.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com