Eurozone unemployment drops to lowest in 8 years

April 10, 2017

Data from Europe last week showed that unemployment in the Eurozone fell to an eight-year low in February. The jobless rate fell to 9.5% from 9.6% a month earlier. While growth in jobs continues to be strong, there is a wide disparity in the range of unemployment rates across the region. Germany is at or very close to full employment with a rate of 3.9%, below that of the UK and US. On the other hand, Greece and Spain have rates of 23.1% and 18% respectively. At the height of the crisis, the unemployment rate for the Eurozone as a whole peaked at 12.1%. Rising employment should spur greater consumer demand, potentially driving through the higher inflation.

The UK’s dominant service sector activity rose at a faster than expected pace in March. The sector Purchasing Managers Index (PMI) rose to 55 compared with an expectation of 53.5. Anything over 50 indicates expansion. The better data spurred the pound to rise slightly against the dollar as traders priced in the still buoyant UK economy. Respondents to the survey indicated that they remained optimistic about the year ahead while the lower pound has led to an increase in interest from international buyers.

US auto sales for March came in 2% lower than March 2016, disappointing expectations. While sales are still relatively strong and 2016 was a particularly good year for the industry, the slowdown could be an indication of a weakening consumer. A primary driver may well be the cost of credit which has begun to be impacted by the Federal Reserve interest rate rises and higher inflation expectations. Car buyers have become very used to financing vehicle purchases with cheap borrowing making it much easier for manufacturers to make sales.

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UK inflation data is released on Tuesday followed by US jobs growth and inflation figures on Thursday and Friday respectively.