Updating time series analysis for Eurocoin, a leading growth indicator for the Euro area economy issued by CEPR and Banca d’Italia.

In April 2016, Eurocoin reading stood at 0.28, down from 0.34 in March 2016 and marking the lowest reading since March 2015. In other words, leading growth indicator for the euro area is now at its lowest reading in 12 months. Given previous 1Q preliminary growth estimate at 0.6% (q/q growth) from the Eurostat, current level of Eurocoin suggest quarterly growth slowdown to around 0.4%. Since April 2013 (when Eurocoin turned positive for the first time in the recovery cycle), the indicator has been averaging 0.319, which implies April reading is substantially lower than average growth activity over the last 36 months.

Charts:

Charts below highlight impotency of the ECB's traditional policy framework:

Euro area leading growth indicator Eurocoin, released by Banca d'Italia and CEPR, posted a reading of 0.45 in December, marking a rise from 0.37 in November and signalling some improvement in growth conditions. However, on 3mo average basis, 4Q 2015 reading came in at 0.393 against 3Q 2015 reading of 0.402. Given 3Q reading coincided with preliminary real GDP expansion of 0.3 percent, this suggests that actual growth did not tick up significantly from 3Q.


Overall, from both growth and inflation points of view, the ECB policies remain ineffective:



Overall, per Eurocoin release, the upside to the indicator in December was provided by  household consumption, labour market performance and the upturn in industrial production. In other words, we have domestic demand-driven growth, which is a net positive compared to the first half of 2015 when growth still relied predominantly on financial markets valuations and exports.

Eurocoin for November - euro area's leading growth indicator - remained basically flat at 0.37, rising only marginally from 0.36 in October. Both months are posting readings below 3mo and 6mo averaged (0.373 and 0.392), signalling growth at around Q2-Q3 2015 average.



In summary: little evidence in growth acceleration from 3Q 2015 levels. It is worth noting that preliminary growth estimate for 3Q 2015 came in at 0.3%, joint-lowest since 2Q 2014 (3Q 2014 growth was identical to 3Q 2015). This stands contrasted to today's Markit Manufacturing PMI for Eurozone which posted a reading of 52.8 for November (moderately strong expansion) up on 52.3 in October.


It is worth noting that both PMIs and Eurocoin have posted over-estimates of actual growth conditions in recent months.