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World Economy

OPEC Monthly Oil Market Report – September 2017


considerably negatively impacted by the hurricane season and the Fed now expected to lift rate rates only in

the coming year – has impacted the Euro, which rose to its highest level since the beginning of the year,

standing at more than $1.20/€ at the beginning of September. Challenges in the Euro-zone remain. While

concerns about sovereign debt levels in some Euro-zone economies have gone away somewhat, sovereign

debt levels in several economies remain high and issues may re-emerge again if current economic

improvements slow.

Labour market

developments continued to improve and the unemployment rate remained at 9.1% in July for

the second month in a row, marking the lowest level since 2009. So far, the improving labour market seems

to have been a positive driver for inflation. But while job additions have been an important support factor,

further evidence of rising wages must still be seen. Moreover, developments differ widely within the

Euro-zone. Germany’s unemployment rate stood at 3.7% in July, down from 3.8% in June, while in Spain, it

was still at 17.1% in July, unchanged from June.


improved, but remains muted. The recent August

number has, however, improved in this respect, moving up to 1.5% from 1.3% in July. Core inflation – that is,

the consumer price index (CPI), excluding energy, tobacco and food – remained unchanged at 1.2% y-o-y in

August, the same level as in July. Both numbers must be compared with the ECB’s approximately 2%

inflation target.



will provide further details about potentially phasing out its quantitative easing programme in its

upcoming October meeting. As the ECB’s inflation expectation moves up in the coming months, a reduction

in monetary stimulus towards the end of the year remains the most likely scenario, as has been indicated

already. In addition to the somewhat softening inflation trend in the Euro-zone, credit supply growth from

financial institutions to the private, non-financial sector appears to be decelerating again to stand at 1.3%

y-o-y in July, the lowest level since November 2016 and the fourth consecutive month of slow down. While

this remains at a good level, it may indicate a softening investment environment, given the importance of

bank lending to the Euro-zone economy. Moreover, banking sector-related issues remain, and while the

banking sector in the rest of the Euro-zone seems to be in a relatively better situation compared with

previous years, the sector is only slowly healing.

Graph 3 - 4: Euro-zone CPI and lending activity

Graph 3 - 5: Euro-zone PMIs

Industrial production

grew by 2.7% y-o-y in June, after reaching 4.0% in May.

Retail sales

growth in value

terms were once again an important support factor for Euro-zone growth, increasing by 3.3% y-o-y in July,

after reaching 3.8% y-o-y in June. As these indicators remained at considerable levels over the past months

and demonstrate a healthy dynamic, ongoing improvements in the underlying economy are forecast to be

carried over into 2H17 and the coming year. However, it remains to be seen if the trend will stay as strong as

in 1H17 or, as currently expected will slow down somewhat.

The latest


indicators confirmed ongoing expansion in the Euro-zone. The manufacturing PMI increased

to 57.4 in August, matching June levels, which were the highest of the index since its initiation, and compare

with 56.6 in July. The important PMI for the services sector, which constitutes the largest sector in the

Euro-zone, retraced only slightly, remaining at a high level of 54.7 in August, after seeing 55.4 in July.














Aug 12

Dec 12

Apr 13

Aug 13

Dec 13

Apr 14

Aug 14

Dec 14

Apr 15

Aug 15

Dec 15

Apr 16

Aug 16

Dec 16

Apr 17

Aug 17


MFI lending (RHS)

Sources: Statistical Office of the European Communities,

European Central Bank and Haver Analytics.

% change y-o-y

% change y-o-y











Aug 16

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17


Sources: IHS Markit and Haver Analytics.

Services PMI

Manufacturing PMI