Eu­ro­zone job­less­ness at 8-year low, but wages, in­fla­tion are still lag­ging

Austin American-Statesman - - BUSINESS -

The eu­ro­zone econ­omy is heal­ing nicely but in­fla­tion re­mains weak

good news for con­sumers in the short run but a sign of un­der­ly­ing weak­ness in wages and com­pa­nies’ pric­ing power.

That’s the take-away from eco­nomic re­ports re­leased Mon­day that showed while the un­em­ploy­ment rate in the 19-coun­try cur­rency union fell to its low­est in eight years, price in­creases are mod­est.

The num­ber of peo­ple in work rose by 148,000 in June, the Euro­stat statis­tics agency said Mon­day, bring­ing the un­em­ploy­ment rate to 9.1 percent, from 9.2 percent in May. That echoes re­ports in re­cent weeks of ris­ing busi­ness ac­tiv­ity and con­fi­dence across all eu­ro­zone coun­tries — even those, like Greece, that have been hit hard­est by fi­nan­cial trou­bles.

Such im­prove­ments have em­bold­ened the Euro­pean Cen­tral Bank to con­sider when it might sig­nal a phas­ing out of its bond-buy­ing stim­u­lus pro­gram, un­der which it pumps 60 bil­lion eu­ros ($70 bil­lion) a month into the econ­omy. ECB Pres­i­dent Mario Draghi has said it would likely con­sider such a move in the fall.

But the miss­ing piece in the eu­ro­zone’s re­cov­ery is a sig­nif­i­cant rise in in­fla­tion, which the ECB is tasked with get­ting to just un­der 2 percent. While weak in­fla­tion can be good for shop­pers, it points to fragili­ties in the econ­omy: wages are not ris­ing quickly enough to spur spend­ing or com­pa­nies may not be con­fi­dent enough in con­sumers to raise their prices.

In July, the an­nual in­fla­tion rate was stuck at 1.3 percent. And what gains there were, were mostly due to en­ergy price in­creases of 2.2 percent. Ex­clud­ing volatile items like en­ergy, food, al­co­hol and to­bacco, prices were up a still-mod­est 1.2 percent.

Econ­o­mists say in­fla­tion is un­likely to rise sub­stan­tially as long as there re­mains slack in the la­bor mar­ket.

“While June’s un­em­ploy­ment data paint a pos­i­tive pic­ture of the eu­ro­zone la­bor mar­ket, July’s (in­fla­tion) re­lease con­firms that this strength has yet to gen­er­ate in­fla­tion­ary pres­sure,” said Jen­nifer McKe­own, chief Euro­pean econ­o­mist at Cap­i­tal Eco­nom­ics in London.

NHTSA said it’s “deeply con­cerned” that some au­tomak­ers have low com­ple­tion rates. In a 2015 or­der, NHTSA threat­ened fines against au­tomak­ers who don’t com­ply with dead­lines. Asked if fines are pos­si­ble, an agency spokes­woman said it is mon­i­tor­ing com­pli­ance “and will take fur­ther ac­tion as ap­pro­pri­ate.”

Au­tomak­ers say com­ple­tion rates are im­prov­ing and they’re co­op­er­at­ing with the gov­ern­ment. Some say they’ve had trou­ble get­ting parts, and most have had dif­fi­culty find­ing own­ers and per­suad­ing them to get cars re­paired.

Subaru, Mitsubishi and Nis­san did not re­spond to re­quests for com­ment.

Crit­ics such as Nel­son say NHTSA is rud­der­less un­der the Trump ad­min­is­tra­tion. Since Pres­i­dent Don­ald Trump took of­fice, the agency has been with­out an ad­min­is­tra­tor and two top deputies. But the re­calls were mov­ing slowly be­fore Trump took of­fice, records show.

Ford’s slow re­sponse in the Jan­uary 2016 re­call of driver-side in­fla­tors in Ford Ranger pick­ups means thou­sands of trucks with dan­ger­ous in­fla­tors are still be­ing driven. A South Carolina man was killed by an in­fla­tor in De­cem­ber of 2015 when his Ranger crashed. Only 511 of the nearly 362,000 re­called Rangers from the 2004 through 2006 model years have been fixed, with another 3,500 own­ers un­reach­able or ve­hi­cles re­moved from use, ac­cord­ing to Ford’s lat­est re­port. Ford had two other re­calls from 2015 with com­ple­tion rates un­der 40 percent.

Spokes­woman El­iz­a­beth Weigandt says Ford has been re­plac­ing Ranger in­fla­tors in high-risk ar­eas with newer ver­sions of the same in­fla­tors that are in the ve­hi­cles now, with the in­tent of swap­ping them for safer ones later, she said. Since the in­fla­tors de­te­ri­o­rate over time, newer ones are bet­ter. “We are work­ing with our sup­pli­ers to ex­pe­dite fi­nal rem­edy parts for these ve­hi­cles and ex­pect those to be avail­able in early fourth quar­ter 2017,” she said, de­clin­ing fur­ther com­ment.

Quar­terly re­ports filed by BMW, Fiat Chrysler, Daim­ler Vans, Nis­san, Mazda and Mitsubishi all showed com­ple­tion rates un­der 50 percent. Daim­ler hit only 8.4 percent and BMW reached 28.6 percent. Fiat Chrysler’s lone re­call came in at 48 percent, while one Toy­ota re­call was above 50 percent and another just be­low. Subaru hit 57 percent. Due to a parts sup­plier prob­lem, BMW got a five-month dead­line ex­ten­sion.

Most of the re­ports are as of March 31, the lat­est avail­able. Fiat Chrysler and Subaru fig­ures are from the sec­ond quar­ter, while the lat­est avail­able Nis­san and Mitsubishi re­ports were from last year’s third quar­ter. At that time, Mitsubishi was at 31 percent, while Nis­san reached just 25.6 percent.

Even Honda, which has re­placed over 63 percent of the in­fla­tors in its two “Pri­or­ity One” re­calls, has 3.3 mil­lion in­fla­tors left to fix.

In a let­ter to sen­a­tors, NHTSA Act­ing Deputy Ad­min­is­tra­tor Jack Daniel­son wrote that au­tomak­ers have had enough time to get re­place­ment parts.

Sev­eral ve­hi­cle own­ers say deal­ers are still turn­ing them away for lack of parts. John Car­roll of Bel Air, Mary­land, near Bal­ti­more, said he checks with his dealer of­ten to see if an in­fla­tor has ar­rived for his 2010 Mercedes ML350 driver’s air bag.

“The an­swer is al­ways the same. They don’t have the parts yet,” Car­roll said.

To get over 60 percent, Honda set up teams in ma­jor metro ar­eas who visit own­ers’ homes. In some cases, Honda will send tech­ni­cians to fix cars in drive­ways. The com­pany also has used let­ters, so­cial me­dia and tele­phone calls to reach own­ers, spokesman Chris Martin said.

NHTSA has urged au­tomak­ers to take steps sim­i­lar to Honda, and it has hired a mon­i­tor to watch the au­tomak­ers.

PA­TRICK SEMANSKY / AP

John Car­roll of Bel Air, Mary­land, next to his 2010 Mercedes ML350, says his dealer keeps turn­ing him away to re­place a re­called driver’s side Takata air bag in­fla­tor be­cause parts have not ar­rived.

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