Winter sales and mortgages bring January inflation down

INFLATION fell to 2.2pc in January, new figures show.

The rate has fallen for two months in a row having hit 2.9pc in November.

According to the Central Statistics Office, winter sales and lower mortgage costs brought the rate down 0.5pc in January.

Year-on-year, however, the rate increased.

The price of clothing and footwear fell by 10.7pc while furniture and other household goods dropped by 2.5pc.

Clothing and footwear prices fell by 10.7pc during January, while prices of furniture and other household equipment dropped by 2.5pc.



Irishindependant.ie

No Greek-style deal for 'on-track' plan Ireland

THE EU's top economics official, Olli Rehn, ruled out Greek-style discounts for Irish debt, insisting that the Irish economy is bouncing back to health under the bailout programme.

"Greece is a specific and unique case and will not be repeated in the case of other euro area countries," Mr Rehn said yesterday. "Besides, the Irish programme is on track. Despite facing difficulties and painful adjustments, Ireland is on the way to recovery."

The comments came as the Greek government races to complete a list of reforms demanded by finance ministers before the end the month to unlock the €130bn bail-out agreed early yesterday morning.

The Greek parliament must now pass anti-bribery laws and open up protected professions such as the law and medicine to competition within ten days if the country is to get the latest bailout.

News of the agreement sent yields on Irish and Portuguese bonds lower. European stocks fell from a six-month high amid speculation the latest bailout deal won't be enough to solve the debt crisis. National Bank of Greece, the largest Greek lender, plunged 9.5pc.

The Stoxx Europe 600 Index closed down 0.5pc last night although it was still 24pc higher than it was last September at the height of the crisis.

In a blow to the Irish government's efforts to reduce the amount paid on our loans, Swedish Finance Minister Anders Borg said his country probably won't follow euro-area countries in lowering the interest rate on loans to Ireland. Swedish taxpayers expect to be compensated close to market conditions, he told reporters in Brussels. Sweden has pledged to lend €600m to Ireland although the money has yet to be paid.

In Portugal there were increasing signs that the country may also seek changes to its bailout.

Opposition leaders, businesses and trade union leaders all want the government there to renegotiate the terms of Portugal's €78bn bail-out agreement following disturbances in some areas and painful austerity.

Junior Finance Minister Brian Hayes reiterated in Brussels yesterday that Ireland would not be seeking a similar deal to the Greek deal by burning bond holders.

"This is an issue for Greece in the first instance -- this is about Greece getting through the issues that they face and putting them on a sustainable debt path," Mr Hayes told reporters after the 13-hour meeting where he was standing in for Finance Minister Michael Noonan.

Mr Hayes said he was "hopeful" that talks on renegotiating the cost of the promissory notes to fund the wind-down of the former Anglo Irish Bank would be buoyed after the ECB's decision to get involved in the Greek bailout.

"Obviously we're hopeful. We will continue our dialogue with the ECB, the commission, the IMF and the troika," he said.

"There are a number of outstanding issues.

"We'll be working on the promissory notes, obviously, but we're not putting any specific timeline on it. I think that wouldn't be helpful at the time," he said.

The ECB and national central banks will send any profits on their Greek government bonds back to Athens.

Mr Hayes said the Irish Central Bank's holdings of Greek debt were "negligible, a small sum of money".

""Greece is a specific and unique case and will not be repeated in the case of other euro area countries," Mr Rehn said yesterday. "Besides, the Irish programme is on track. Despite facing difficulties and painful adjustments, Ireland is on the way to recovery."

The comments came as the Greek government races to complete a list of reforms demanded by finance ministers before the end the month to unlock the €130bn bail-out agreed early yesterday morning.

The Greek parliament must now pass anti-bribery laws and open up protected professions such as the law and medicine to competition within ten days if the country is to get the latest bailout.

News of the agreement sent yields on Irish and Portuguese bonds lower. European stocks fell from a six-month high amid speculation the latest bailout deal won't be enough to solve the debt crisis. National Bank of Greece, the largest Greek lender, plunged 9.5pc. The Stoxx Europe 600 Index closed down 0.5pc last night although it was still 24pc higher than it was last September at the height of the crisis.

In a blow to the Irish government's efforts to reduce the amount paid on our loans, Swedish Finance Minister Anders Borg said his country probably won't follow euro-area countries in lowering the interest rate on loans to Ireland. Swedish taxpayers expect to be compensated close to market conditions, he told reporters in Brussels. Sweden has pledged to lend €600m to Ireland although the money has yet to be paid.

In Portugal there were increasing signs that the country may also seek changes to its bailout. Opposition leaders, businesses and trade union leaders all want the government there to renegotiate the terms of Portugal's €78bn bail-out agreement following disturbances in some areas and painful austerity.

Junior Finance Minister Brian Hayes reiterated in Brussels yesterday that Ireland would not be seeking a similar deal to the Greek deal by burning bond holders.

"This is an issue for Greece in the first instance -- this is about Greece getting through the issues that they face and putting them on a sustainable debt path," Mr Hayes told reporters after the 13-hour meeting where he was standing in for Finance Minister Michael Noonan.

Mr Hayes said he was "hopeful" that talks on renegotiating the cost of the promissory notes to fund the wind-down of the former Anglo Irish Bank would be buoyed after the ECB's decision to get involved in the Greek bailout. "Obviously we're hopeful. We will continue our dialogue with the ECB, the commission, the IMF and the troika," he said. "There are a number of outstanding issues.

"We'll be working on the promissory notes, obviously, but we're not putting any specific timeline on it. I think that wouldn't be helpful at the time," he said.

The ECB and national central banks will send any profits on their Greek government bonds back to Athens. Mr Hayes said the Irish Central Bank's holdings of Greek debt were "negligible, a small sum of money".

Greece is a specific and unique case and will not be repeated in the case of other euro area countries," Mr Rehn said yesterday. "Besides, the Irish programme is on track. Despite facing difficulties and painful adjustments, Ireland is on the way to recovery."

The comments came as the Greek government races to complete a list of reforms demanded by finance ministers before the end the month to unlock the €130bn bail-out agreed early yesterday morning.

The Greek parliament must now pass anti-bribery laws and open up protected professions such as the law and medicine to competition within ten days if the country is to get the latest bailout.

News of the agreement sent yields on Irish and Portuguese bonds lower. European stocks fell from a six-month high amid speculation the latest bailout deal won't be enough to solve the debt crisis. National Bank of Greece, the largest Greek lender, plunged 9.5pc. The Stoxx Europe 600 Index closed down 0.5pc last night although it was still 24pc higher than it was last September at the height of the crisis.

In a blow to the Irish government's efforts to reduce the amount paid on our loans, Swedish Finance Minister Anders Borg said his country probably won't follow euro-area countries in lowering the interest rate on loans to Ireland. Swedish taxpayers expect to be compensated close to market conditions, he told reporters in Brussels. Sweden has pledged to lend €600m to Ireland although the money has yet to be paid.

In Portugal there were increasing signs that the country may also seek changes to its bailout. Opposition leaders, businesses and trade union leaders all want the government there to renegotiate the terms of Portugal's €78bn bail-out agreement following disturbances in some areas and painful austerity.

Junior Finance Minister Brian Hayes reiterated in Brussels yesterday that Ireland would not be seeking a similar deal to the Greek deal by burning bond holders.

"This is an issue for Greece in the first instance -- this is about Greece getting through the issues that they face and putting them on a sustainable debt path," Mr Hayes told reporters after the 13-hour meeting where he was standing in for Finance Minister Michael Noonan.

Mr Hayes said he was "hopeful" that talks on renegotiating the cost of the promissory notes to fund the wind-down of the former Anglo Irish Bank would be buoyed after the ECB's decision to get involved in the Greek bailout. "Obviously we're hopeful. We will continue our dialogue with the ECB, the commission, the IMF and the troika," he said. "There are a number of outstanding issues.

"We'll be working on the promissory notes, obviously, but we're not putting any specific timeline on it. I think that wouldn't be helpful at the time," he said.

The ECB and national central banks will send any profits on their Greek government bonds back to Athens. Mr Hayes said the Irish Central Bank's holdings of Greek debt were "negligible, a small sum of money".

Irishindependant.ie



Euro slips on Greek delay

The euro dipped and a share market rally ran out steam today on signs euro zone officials might delay Greece's next rescue package, while still avoiding a disorderly default.

The single currency eased 0.3 per cent, falling back below $1.31 after EU sources said euro zone finance ministers were not satisfied all Greece's political parties were committed to fresh austerity measures and might withhold bailout funds until April.

European shares shed some of their gains though US futures still pointed to a higher opening on Wall Street, with the release of January factory output and capacity utilisation figures later in the day expected to add to signs of economic improvement.

Riskier assets like equities had resumed their rally earlier today on hopes a growing flood of money from major central banks will support growth as data showed the euro zone's debt-laden economy headed - as expected - for a recession.

Sentiment was also supported by promises by Chinese leaders to keep investing in euro zone debt.

The euro fell to $1.3084, retreating from a session high of $1.3191 and well off the February 9th peak of $1.3322.

Economic output in the 17-country euro zone fell a widely-expected 0.3 per cent in the last three months of 2011 compared to the previous quarter, and is likely to contract further in the current quarter to mark its second recession in three years.

But the French economy posted a surprise expansion in the last quarter of 2011 and a slowdown in Europe's biggest economy, Germany, was not quite as bad as expected.

"Activity remains close to very weak levels but at least the (European) economy doesn't seem to be on a free-fall," said Annalisa Piazza, market economist at Newedge Strategy.

Marco Valli, chief euro zone economist at UniCredit Research noted that forward-looking indicators like surveys of purchasing managers show that the economy is likely to stabilise or resume moderate expansion in the first three months of 2012.

The FTSEurofirst index of top European companies was up 0.9 per cent at 1,079.13 points today while, helped by gains in Asia, the MSCI global index was up 0.6 per cent.

The gains in Asia came as central bank governor Zhou Xiaochuan reiterated commitments by premier Wen Jiabao that China was ready to play a bigger role in solving Europe's debt problems.

Demand for stocks and riskier currencies, however, remains tempered by the ongoing risks from the euro zone debt crisis.

In Greece, the conservative New Democracy party said its leader, Antonis Samaras, had sent a letter to the European Union and IMF committing himself to implementing a new austerity package, which was a key condition to secure approval of a €130 billion bailout.

Meanwhile oil prices gained over $2 a barrel today, after Iranian state TV said Iran had stopped exports to six European states in retaliation for European Union sanctions on the Islamic state, adding to supply concerns.

Brent crude was up 65 cents at $118.00 a barrel, having traded as high as $118.30 earlier in the session. US crude rose 87 cents to $101.61.



Reuters

Euro zone service sector shrinks

The euro zone's service sector shrank unexpectedly this month, reviving fears that the economy risks sinking into recession, a business survey showed.

Markit's Eurozone Services Purchasing Managers' Index (PMI) fell to 49.4 from January's 50.4, missing even the lowest forecast in a Reuters poll of 44 economists whose predictions centred on a rise to 50.6.

A reading below 50 signifies a contraction.

"There is a possibility GDP will be flat but chances are we could easily slide back into a very small contraction," said Chris Williamson, chief economist at data compiler Markit.

The region's economy contracted 0.3 per cent in the dying months of 2011 so a second quarter of contraction would meet the technical definition of recession. A Reuters poll last week suggested it will probably wallow in a relatively mild downturn until the second half of this year.

The 17-country region's manufacturing sector fared little better, with the PMI barely rising to 49.0 from January's 48.8, spending its seventh month below 50 and missing expectations for a faster rise to 49.5.

The factory output index held steady at January's 50.4 but new orders fell for the ninth month, with the index at 47.1, slightly up from January's 46.5.

"We need order growth to pick up but it is still in decline, they are still relying on their pipeline of previous orders to sustain these levels of activity. In the service sector they are stimulating demand through price cuts, manufacturers are also squeezing their margins," Mr Williamson said.

Although input costs continued to rise, services firms were forced to cut their prices charged for the third month running, with that sub index falling to 48.3 from January's 48.7, its lowest reading since July 2010.

Despite the price cutting to win business, the composite PMI, which combines the services and manufacturing data and is often seen as a growth indicator, fell to 49.7 from last month's 50.4.

The flash data was collected largely before euro zone finance ministers agreed a €130 billion bailout rescue for Greece and Markit said this could lead to sharper than normal revisions when final figures are released at the start of March.

The rescue deal buys time to stabilise the currency region and strengthen its financial firewalls, but it leaves deep doubts about Greece's ability to recover and avoid default in the longer term.

While the debt crisis rages on, euro zone consumer confidence rose for the second consecutive month in February as Europeans showed timid signs of increased spending, official figures showed yesterday.

But earlier data from Germany, Europe's biggest economy and the region's growth engine, showed growth slowed from last month's seven-month high and it was a similar picture in France.

Private sector firms reduced their work force for the second month running in a bid to cut costs with the composite employment index only nudging up to 49.5 from January's 49.4.

"It is not a great sign. There have been widespread job losses in the periphery, which you would expect. More worryingly there was virtually no job creation going on in France and in Germany the rate of growth has eased quite sharply," Mr Williamson said.

Euro zone unemployment reached 10.4 per cent at the end of last year, its highest since the introduction of the European single currency, official data showed late last month. It is seen peaking at 10.8 per cent in the second half of this year.



Reuters

Britain set for 'modest recovery'

The British economy looks set for a moderate recovery starting later this year as falling inflation eases the squeeze on household incomes, Bank of England deputy governor Charles Bean has said.

While he welcomed the latest bailout deal for Greece, Mr Bean said in a speech at a business event in Glasgow yesterday that the euro zone debt crisis remains the single biggest risk to the UK economy, which may see slow growth until mid-year.

"Despite the recent more encouraging signs, we continue to expect underlying growth to remain sluggish in the first half of the year," Mr Bean said.

The expected fall in inflation should help a modest pickup in household spending, he said, noting that the strong retail sales seen in January could be a first sign of this.

"But while growth should gradually strengthen, the continuing headwinds from the unwinding of excessive debt and the government's continuing fiscal consolidation mean that the pace of recovery is likely to remain moderate by historical standards," he said.

Mr Bean's analysis largely echoed the views presented in the bank's February inflation report in which the bank predicted that growth would improve later this year and that inflation would be close to its 2 per cent target over the key two-year horizon.

That forecast has fuelled the view the bank may not add further stimulus when the latest £50 billion round of asset purchases is complete in May.

Mr Bean said the euro crisis remained the biggest risk for Britain despite the new bailout deal for Greece.

"While the agreement between the Greek government and the euro-area authorities is certainly welcome, there still remains a possibility that events could unfold in a disorderly and damaging fashion at some stage in the future."

Mr Bean defended the bank's early-February decision to pump £50 billion more into the economy in its quantitative easing programme of asset purchases, saying that without this inflation would have been likely to stay below the bank's 2 per cent target in the medium-term.

But he also reiterated the bank's view that it could not set monetary policy in a pre-emptive way to shield the economy against worst-case scenarios.

"It would make little sense to set the level of asset purchases so as to try to counteract an extreme event whose likelihood, timing and magnitude we have no realistic way of assessing," he said.

In his speech in Glasgow, Mr Bean also touched on the debate about the possibility of Scottish independence, saying the central bank could not define its own role in such a scenario.

"If the referendum should result in a vote in favour of an independent Scotland, the associated monetary arrangements would then be one of many matters needing to be settled," he said. "But the exact form of those arrangements would be for the Westminster and Scottish parliaments to decide, not the Bank of England."

Scottish National Party leader and first minister in Scotland's devolved government, Alex Salmond, has said he would want to keep the pound, at least temporarily. This would allow Scotland to control taxes, spending and borrowing while the Bank of England would continue to set monetary policy.

Reuters