ECB (MONTHLY BULLETIN: AUGUST)

EN 0112010 MONTHLY BULLETIN0212010 AUGUST 0312010 0412010 0512010 0612010 0712010 0812010 0912010 1012010 1112010 1212010 EUROPEAN CENTRAL BANK MONTHLY BULLETIN 0812010MONTHLY BULLETIN AUGUST 2010 In 2010 all ECB publications feature a motif taken from the €500 banknote.© European Central Bank, 2010 Address Kaiserstrasse 29 60311 Frankfurt am Main Germany Postal address Postfach 16 03 19 60066 Frankfurt am Main Germany Telephone +49 69 1344 0 Website http://www.ecb.europa.eu Fax +49 69 1344 6000 This Bulletin was produced under the responsibility of the Executive Board of the ECB. Translations are prepared and published by the national central banks. All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. The cut-off date for the statistics included in this issue was 4 August 2010. ISSN 1561-0136 (print) ISSN 1725-2822 (online)CONTENTS EDITORIAL 5 EURO AREA STATISTICS S1 ECONOMIC AND MONETARY ANNEXES DEVELOPMENTS 9 Chronology of monetary policy The external environment of the euro area 9 measures of the Eurosystem I Monetary and fi nancial developments 14 Documents published by the European Central Bank since 2009 VPrices and costs 48 Glossary XIIIOutput, demand and the labour market 61 Exchange rate and balance of payments developments 67 Boxes: 1 The funding of euro area MFIs through the issuance of debt securities 17 2 The results of the July 2010 bank lending survey for the euro area 22 3 Covered bond market developments and the covered bond purchase programme 32 4 An assessment of the capital shortfall revealed in the EU-wide stress-testing exercise 40 5 Integrated euro area accounts for the fi rst quarter of 2010 42 6 Euro area house prices and the rent component of the HICP 49 7 Results of the ECB Survey of Professional Forecasters for the third quarter of 2010 56 8 The introduction of the euro in Estonia on 1 January 2011 69 ARTICLES Oil prices – their determinants and impact on euro area infl ation and the macroeconomy 75 Recent developments in global and euro area trade 93 Harmonised ECB statistics on euro area investment funds and their analytical use for monetary policy purposes 109 ECB Monthly Bulletin August 2010 3ABBREVIATIONS COUNTRIES LU Luxembourg BE Belgium HU Hungary BG Bulgaria MT Malta CZ Czech Republic NL Netherlands DK Denmark AT Austria DE Germany PL Poland EE Estonia PT Portugal IE Ireland RO Romania GR Greece SI Slovenia ES Spain SK Slovakia FR France FI Finland IT Italy SE Sweden CY Cyprus UK United Kingdom LV Latvia JP Japan LT Lithuania US United States OTHERS BIS Bank for International Settlements b.o.p. balance of payments BPM5 IMF Balance of Payments Manual (5th edition) CD certifi cate of deposit c.i.f. cost, insurance and freight at the importer’s border CPI Consumer Price Index ECB European Central Bank EER effective exchange rate EMI European Monetary Institute EMU Economic and Monetary Union ESA 95 European System of Accounts 1995 ESCB European System of Central Banks EU European Union EUR euro f.o.b. free on board at the exporter’s border GDP gross domestic product HICP Harmonised Index of Consumer Prices HWWI Hamburg Institute of International Economics ILO International Labour Organization IMF International Monetary Fund MFI monetary fi nancial institution NACE statistical classifi cation of economic activities in the European Union NCB national central bank OECD Organisation for Economic Co-operation and Development PPI Producer Price Index SITC Rev. 4 Standard International Trade Classifi cation (revision 4) ULCM unit labour costs in manufacturing ULCT unit labour costs in the total economy In accordance with EU practice, the EU countries are listed in this Bulletin using the alphabetical order of the country names in the national languages. ECB Monthly Bulletin 4 August 2010EDITORIAL Based on its regular economic and monetary appropriate. Accordingly, the Governing Council analyses, the Governing Council at its meeting will continue to monitor all developments over on 5 August 2010 viewed the current key the period ahead very closely. ECB interest rates as appropriate and therefore decided to leave them unchanged. Considering Turning to the economic analysis, after a period all the new information which has become of sharp decline, euro area economic activity has available since its meeting on 8 July 2010, been expanding since mid-2009. Euro area real the Governing Council continues to expect GDP increased, on a quarterly basis, by 0.2% in price developments to remain moderate over the fi rst quarter of 2010. The available economic the policy-relevant medium-term horizon, data and survey-based indicators suggest a benefi ting from low domestic price pressures. strengthening in economic activity in the second The available economic data and survey-based quarter of 2010, and the available data for the indicators suggest a strengthening in economic third quarter are better than expected. Looking activity in the second quarter of 2010, and the further ahead, and taking into account temporary available data for the third quarter are better than effects, the Governing Council continues to expected. Looking further ahead, and taking expect real GDP to grow at a moderate and still into account a number of temporary factors, uneven pace over time and across economies the Governing Council continues to expect and sectors of the euro area. Ongoing growth the euro area economy to grow at a moderate at the global level and its impact on the and still uneven pace, in an environment of demand for euro area exports, together with the uncertainty. The monetary analysis confi rms accommodative monetary policy stance and the that infl ationary pressures over the medium term measures adopted to restore the functioning of remain contained, as suggested by weak money the fi nancial system, should continue to support and credit growth. Overall, the Governing the euro area economy. However, the recovery Council expects price stability to be maintained in activity is expected to be dampened by the over the medium term, thereby supporting the process of balance sheet adjustment in various purchasing power of euro area households. sectors and labour market prospects. Infl ation expectations remain fi rmly anchored in line with the aim of keeping infl ation rates In the Governing Council’s assessment, the risks below, but close to, 2% over the medium term. to the economic outlook are broadly balanced in The fi rm anchoring of infl ation expectations an environment of uncertainty. On the upside, remains of the essence. the global economy and foreign trade may recover more strongly than is now projected, Monetary policy will do all that is needed to thereby further supporting euro area exports. maintain price stability in the euro area over On the downside, concerns remain relating to the medium term. This is the necessary and the emergence of renewed tensions in fi nancial central contribution that monetary policy makes markets, renewed increases in oil and other to fostering sustainable economic growth, job commodity prices, and protectionist pressures, as creation and fi nancial stability. All the non- well as the possibility of a disorderly correction standard measures taken during the period of of global imbalances. acute fi nancial market tensions, referred to as “enhanced credit support” and the Securities With regard to price developments, euro area Markets Programme, are fully consistent annual HICP infl ation increased to 1.7% in July, with the Governing Council’s mandate and, according to Eurostat’s fl ash estimate, from by construction, temporary in nature. The 1.4% in June, most likely owing to upward Governing Council remains fi rmly committed base effects in the energy and food components. to price stability over the medium to longer In the next few months, annual HICP infl ation term. The monetary policy stance and the rates are expected to display some further overall provision of liquidity will be adjusted as volatility around the current level. Looking ECB Monthly Bulletin August 2010 5further ahead, in 2011 infl ation rates should The still weak annual growth rate of bank remain moderate overall, benefi ting from low loans to the private sector continues to conceal domestic price pressures. Infl ation expectations countervailing developments, with increasingly over the medium to longer term continue to positive growth in loans to households and be fi rmly anchored in line with the Governing stabilised negative annual growth in loans to Council’s aim of keeping infl ation rates below, non-fi nancial corporations. A lagged response but close to, 2% over the medium term. of loans to non-fi nancial corporations to developments in economic activity is a normal Risks to the outlook for price developments are feature of the business cycle. broadly balanced. Upside risks over the medium term relate, in particular, to the evolution of The data up to June indicate that, after commodity prices. Furthermore, increases in expanding for a few months earlier in the year, indirect taxation and administered prices may the size of banks’ overall balance sheets has be greater than currently expected, owing to not increased further. The challenge remains the need for fi scal consolidation in the coming for banks to expand the availability of credit years. At the same time, risks to domestic price to the non-fi nancial sector when demand picks and cost developments are contained. Overall, up. Where necessary, to address this challenge, the Governing Council will monitor closely the banks should retain earnings, turn to the market future evolution of all available price indicators. to strengthen further their capital bases or take full advantage of government support measures Turning to