Eurozone economy maintaining a modest growth

Paresh Davdra is the Dealing Director of RationalFX, Currency Specialists. Tuesday 04th August 2015 17:15 EDT

Unemployment in the eurozone is neither improving nor getting worse, despite hopes that the latest figures would show a further drop in the jobless rate. The unemployment rate stayed at 11.1 per cent in June from the same level the previous month. Economists had been expecting a small decrease in the rate to 11 per cent. The lowest unemployment rate in the bloc in June was recorded in Germany (4.7 per cent) and the Czech Republic is also faring well (4.9 per cent).

At the other end of the scale is Greece, where unemployment remained 25.6 per cent in April. Despite improving GDP growth in Spain, the country's unemployment rate is also still well in the double digits, at 22.5 per cent. Italy's unemployment rate moved up to 12.7 per cent in June from 12.5 per cent in May, youth joblessness increased to 44.2 per cent, its highest level since 1977 and roughly twice the eurozone average, showing that high-school and university-aged Italians are still desperately struggling to find employment.

Inflation in the 19-nation Eurozone was unchanged in July while the jobless rate for June was also flat, suggesting the economy maintained only modest growth. Consumer prices rose 0.2 per cent in July, the same rate as the previous month and in line with analysts' forecasts.

The Athens stock exchange ended its torrid first day of trading in five weeks 16.2 percent lower, after it reopened for the first time in five weeks. Greek banking stocks were the worst hit with Alpha Bank, Attica Bank and Eurobank Ergasius, Bank of Piraeus and the National Bank of Greece all closed around 30 percent lower - the daily volatility limit. Banks make up about a fifth of the index. It had fallen behind by 22.87% just minutes after opening for trade. Not long after the market reopened at 07:30 GMT, the Athex had plunged to 615.16 points, down by 182.36 points from the 26 June close. 

U.S. labour costs in the second quarter recorded their smallest increase in 33 years amid tepid gains in the private sector, but it likely was a temporary setback against the backdrop of diminishing labour market slack. The Employment Cost Index edged up 0.2 percent, the Labour Department said on Friday. That was the smallest gain since the series started in the second quarter of 1982 Economists had forecast the employment cost index rising 0.6 percent.

The pace of growth in the U.S. manufacturing sector slowed in July and disappointed expectations, according to an industry report released on Monday. The Institute for Supply Management (ISM) said its index of national factory activity fell to 52.7 from 53.5 the month before. The reading was shy of expectations that the pace would remain unchanged at 53.5, according to a Reuter’s poll of economists.

UK manufacturing growth picked up in July, a survey has suggested, after a 26-month low in June. Manufacturing accounts for around 10% of the UK economy, the index rose to 51.9 in July, from 51.4 in June. A figure above 50 indicates expansion. However, it remained below the average of 54.3 the sector has had since April 2013. Production expansion remained dependent on consumer goods manufacturing, which offset a contraction in investment goods such as plant and machinery, Markit said. In addition, demand for exports was being sapped by the sterling-euro exchange rate as new export orders contracted for the fourth consecutive month in July.

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