2Q LFS unemployment rate declined to 7.9%
The 2Q labor force survey showed solid labor market performance, as the unemployment rate declined a robust 2.1pp q/q to 7.9%, down 1.2pp y/y. The activity rate increased with respect to 1Q, by 0.3pp to 48.6%, while the employment rate increased by 1.3pp to 44.8% (-26ths unemployed). The figures were mainly in line with expectations, as the official monthly figures supported strong labor market trends. Given the seasonal pattern, 3Q should show some further improvement, while 4Q brings a trend reversal. The present dynamics support a <9% year-end unemployment rate.
CPI slowed to 5.9% y/y in October
October consumer price inflation came in better than expected; on the monthly level, inflation declined by 0.1% (ESBe +0.2m/m), thus falling below 6% y/y. Food prices were neutral m/m, while footwear and clothing prices increased by 3.4% m/m, as expected. The continuation of favorable oil price developments on global markets translated into lower retail gasoline prices, contributing to the inflation slowdown, as transportation prices declined 2.8% m/m. The inflation outlook remains favorable, as pressures from commodity prices have evaporated and, as the strong base effect unwinds, inflation is expected to slow down in the coming months, eventually going below the 5% threshold at yearend. In inflationary terms, 2009 looks comfortable, as average inflation is expected to be substantially lower than in 2008, but remain sensitive to a resurgence of supply-side pressures and uncertainties regarding administrative price hikes.
