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