OPEC Monthly Oil Market Report – October 2017
mentioned issues in the banking sector, sovereign debt levels in some Euro-zone economies may become a
re-emerging issue, if current economic improvements slow or interest rates would rise too soon or too quick
as sovereign debt levels in several economies remain high. Also, political uncertainty has risen, after
German elections did not provide a clear vote for the government and also as the independence seeking
region of Catalonia has raised economic uncertainty in Spain.
developments continued to improve as the unemployment rate remained at 9.1% in July for
the third month in a row, marking the lowest level since 2009. However, labour market developments differ
widely within the Euro-zone. Germany’s unemployment rate fell to 3.6% in August, down from 3.7% in July,
while in Spain it was still at 17.1% in August for the third consecutive month. So far, the improving labour
market seems to have been a positive driver for inflation as the job additions supported gradually rising
wages. Nominal hourly wages and salaries increased by 2.0% in 2Q17, the latest available number.
was backed only to some extent by these rising labour costs as it remained at 1.5% y-o-y. Core inflation –
that is, the consumer price index (CPI), excluding energy, tobacco and food – fell slightly to 1.1% y-o-y,
compared to 1.2% y-o-y in August. Both numbers must be compared with the ECB’s approximately 2%
While it seems more likely that inflation is rising and economic developments are improving, the
likely to decide upon a reduction in monetary stimulus in the coming months, as has been indicated already.
While inflation has held up well over the past months in the Euro-zone, credit supply growth from financial
institutions to the private, non-financial sector appears to have decelerated but now also seems to have
stabilised again as it rose by 1.54% y-oy- in August. This is indeed a very important source of financing for
the Euro-zone economy as the majority of the important SMEs rely on bank financing; hence the
development of credit growth seems to support the ongoing recovery.
grew by 3.4% y-o-y in July, after 2.7% y-o-y in June, again improving to a significant
growth in value terms were once again an important support factor for Euro-zone growth,
increasing by 2.8% y-o-y, slightly below 3.2% y-o-y in July. These most recent indicators remained at
considerable levels over the past months and now continue to demonstrate a healthy dynamic with ongoing
improvements in the underlying economy. These are forecast to continue in 2H17 and also to some extent in
the coming year. It remains to be seen, however, if the trend will stay as strong as in 1H17 or, as currently
expected, it will slow down somewhat.
Graph 3 - 5: Euro-zone CPI and lending activity
Graph 3 - 6: Euro-zone PMIs
indicators confirmed the ongoing improvement in the Euro-zone. The manufacturing PMI
increased to 58.1 in September, comparing to 57.4 in August. This marks the highest level on record, i.e.
since the initiation of this index back in 2012. The important PMI for the services sector, which constitutes the
largest sector in the Euro-zone improved as well as it moved to 55.8, after seeing a level of 54.7 in August.
The underlying momentum has led to an upward revision in the 2017
forecast for the
Euro-zone, which now stands at 2.2%, compared with 2.1% in the previous month. The 2018 GDP growth
was consequently also lifted to 1.9%, compared to the previous month’s estimate of 1.8%. Political
uncertainties, Brexit procedures, as well as monetary policies remain important factors to monitor.
MFI lending (RHS)
Sources: Statistical Office of the European Communities,
European Central Bank and Haver Analytics.
% change y-o-y
% change y-o-y
Sources: IHS Markit and Haver Analytics.