Category Archives: Euro area growth

4/7/20: ifo Institute Eurozone Growth Outlook


Germany's ifo Institute issued a new growth outlook for Eurozone economy:

  • "Overall, the eurozone economy is likely to see a sharp recession in the first half of 2020. 
  • "GDP already contracted in Q1 by 3.6%. 
  • "In Q2, the decline of GDP is forecast to be historic (-12.3%). 
  • "On the other hand, the recovery is likely to be quick supported by massive stimuli in some eurozone countries with GDP growth reaching +8.3% in Q3 and +2.8% in Q4 2020. 
  • "Yet, the GDP level at the end of last year will not be reached by the end of this year."

In 1Q 2020:

  • GDP fell by 3.6%. 
  • "The greatest negative contribution came from private consumption. 
  • "... firms hold back their investments due to liquidity issues and uncertainty on future developments. 
  • "... external demand was weak and caused exports to plunge. 
  • "Economic activity went down by 5.3% (Italy), 5.3% (France) and 5.2% (Spain). Germany was affected less severely with GDP contracting by 2.2%. 
Dynamics into June:
  • "The European Commission’s economic sentiment indicator fell from 94 points in March further to 65 points in April, rebounded somewhat in May and increased strongly in June up to almost 76 points."
  • "The IHS Markit composite purchasing manager’s index reflects a similar development as it dropped from 30 points in March to as low as 14 points in April. In May it recovered to 32 and in June again up to 48 points." Note: Markit PMIs below 50 indicate continued, compounded contraction, as a rise in index from 32 to 48 between May and June means that contraction was weaker in June.
Summary of forecasts:


Headwinds to the above forecast:
  • "Currently, economic projections are made in face of high epidemiological uncertainty. ... This forecast assumes that a second COVID-19 wave will be prevented. The occurrence of a second wave, with containment measures to being introduced again, is thus a downward risk for our forecast. 
  • "Another uncertainty for this forecast is that we are still learning about consumer reactions to containment measures and it is still unclear, how quickly consumption behavior will normalize.
  • "In addition, the liquidity situation of many companies is deteriorating rapidly. An unexpectedly high number of insolvencies might disturb the economic recovery and cause bigger than expected problems for the banking sector. Currently, in many countries new regulations for postponing insolvencies were introduced, which means that these will become evident later than usual, probably not before autumn. 
  • "Also, numerous private households might run into solvency issues due to lower income and a worsening labour market situation."
In contrast, here are the IMF latest forecasts for the euro area:



Markit PMIs:


29/6/20: Eurocoin Growth Indicator June 2020


Using the latest Eurocoin leading growth indicator for the Euro area, we can position the current COVID19 pandemic-related recession in historical context.

Currently, we have two data points to deal with:

  1. Q1 2020 GDP change reported by Eurostat (first estimate) came in at -3.6 percent with HICP (12-mo average) declining from 1.2 percent in January-February to 1.1 percent in March.
  2. Q2 2020 Eurocoin has fallen from 0.13 in March 2020 to -0.37 in June 2020 and June reading is worse than -0.32 recorded in May. This suggests continued deterioration in GDP growth conditions, with an estimate of -2.1 percent decline in GDP over 2Q 2020. HICP confirms these: HiCP dropped from 1.1 percent in March 2020 to 0.9 percent in May. 
Here are the charts:


We are far, far away from the growth-inflation 'sweet spot':


12/6/19: All’s Well in the Euro Paradise


All is well in the Euro [economy] Paradise...


Via @FT, Germany's latest 10 year bunds auction got off a great start as "the country auctioned 10-year Bunds at a yield of minus 0.24 per cent, according to Germany’s finance agency. The yield was well below the minus 0.07 per cent at the previous 10-year auction in late May. The previous trough of minus 0.11 per cent was recorded in 2016. Notably, demand in Wednesday’s auction was the weakest since late January, with investors placing bids for 1.6-times more than the €22bn that was issued."

Because while the "Euro is forever", economic growth (and the possibility of monetary normalisation) is for never... 

15/2/19: Euro area is sliding toward recession


Based on the latest data through January 2019, Eurozone’s economic problems are getting worse. In 4Q 2018, Euro area posted real GDP growth of just 0,.2% q/q - matching the print for 3Q 2018. Meanwhile, inflation has fallen from 1.7% in December 2018 to 1.6% in January 2018. And Eurocoin - a leading growth indicator for euro area GDP expansion slipped from 0.42 in December 2018 to 0.31 in January 2019. This marked the third consecutive month of decline in Eurocoin, and the steepest fall in 8 months. Worse, July 23016 was the last time Eurocoin was at this level.



Within the last 12 months, Eurozone growth has officially fallen from 0,.7% q/q in 4Q 2017 to 0.2% in 4Q 2018, HICP effectively stayed the same, with inflation at 1.6% in January 2018 agains 1.5% in January 2018. And forward growth indicator has collapsed from 0.95 in January 2018 to 0.31 in January 2019.

Euro area is heading backward when it comes to economic activity, fast.

Germany just narrowly escaped an official recession, with 4Q growth at zero, and 3Q growth at -0.2%


Italy is in official recession, with 3Q 2018 GDP growth of -0.1% followed by 4Q 2018 growth of -0.2%.

Industrial goods production is now down two consecutive months in the Euro area as a whole, with latest print for December 2018 sitting at - 4.2% decline, following a -3.0% y/y fall in November 2018.


Worse, capital goods industrial production - a signal of forward capacity investment, is now down even more sharply: from -4.4% in November 2018 to -5.5% in December 2018.

15/2/19: Euro area is sliding toward recession


Based on the latest data through January 2019, Eurozone’s economic problems are getting worse. In 4Q 2018, Euro area posted real GDP growth of just 0,.2% q/q - matching the print for 3Q 2018. Meanwhile, inflation has fallen from 1.7% in December 2018 to 1.6% in January 2018. And Eurocoin - a leading growth indicator for euro area GDP expansion slipped from 0.42 in December 2018 to 0.31 in January 2019. This marked the third consecutive month of decline in Eurocoin, and the steepest fall in 8 months. Worse, July 23016 was the last time Eurocoin was at this level.



Within the last 12 months, Eurozone growth has officially fallen from 0,.7% q/q in 4Q 2017 to 0.2% in 4Q 2018, HICP effectively stayed the same, with inflation at 1.6% in January 2018 agains 1.5% in January 2018. And forward growth indicator has collapsed from 0.95 in January 2018 to 0.31 in January 2019.

Euro area is heading backward when it comes to economic activity, fast.

Germany just narrowly escaped an official recession, with 4Q growth at zero, and 3Q growth at -0.2%


Italy is in official recession, with 3Q 2018 GDP growth of -0.1% followed by 4Q 2018 growth of -0.2%.

Industrial goods production is now down two consecutive months in the Euro area as a whole, with latest print for December 2018 sitting at - 4.2% decline, following a -3.0% y/y fall in November 2018.


Worse, capital goods industrial production - a signal of forward capacity investment, is now down even more sharply: from -4.4% in November 2018 to -5.5% in December 2018.