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Official figures appear to suggest that the peripheral countries are successfully restoring competitiveness through internal devaluation. Since peaking in 2008/09, whole economy unit labour costs (ULCs) have fallen by about 14% in Greece and Ireland, 7.5% …
18th February 2013
The recent rise in the euro exchange rate is likely to hit Germany and Finland hardest given their strong trade links with non-euro-zone countries. But with exports from the south and periphery set to suffer more from weak demand within the region and …
While the export-driven slump in euro-zone GDP in Q4 did not itself reflect the strength of the euro exchange rate, it further underlined the economy’s vulnerability to the currency’s recent appreciation and the likely need for the ECB to support Draghi’s …
Mario Draghi’s hints that the ECB might respond to the threat posed by the strength of the euro begs the question of just what action it could take. While there are plenty of policy options still available to the ECB, we are far from confident that it …
14th February 2013
Q4’s bigger than expected fall in euro-zone GDP underlined the fact that, while sentiment towards the region has improved, the hard news on the economy remains distinctly weak. … Euro-zone GDP …
December’s rise in euro-zone industrial production does not alter the fact that GDP probably contracted pretty sharply in Q4. … Euro-zone Industrial Production …
13th February 2013
The Swedish Riksbank’s decision to leave interest rates on hold reflects concerns that further rate cuts may prompt household debt to rise further with potentially damaging longer-term consequences. But we still expect the Bank to cut rates again later …
The Norwegian economy rebounded in Q4 after contracting the previous quarter on account of the energy sector, but mainland growth slowed significantly. … Norwegian GDP (Q4 …
Mario Draghi halted the rise of the euro last week merely by hinting that the ECB might respond to the currency’s strength. But with other central banks taking action to weaken their currencies, we doubt that the President’s words will be enough to …
11th February 2013
The European Central Bank (ECB) took a slightly softer tone this month, acknowledging that a stronger exchange rate might alter the inflation outlook. But President Draghi stopped a long way short of pledging either action to bring the currency down or …
7th February 2013
December’s rise in German industrial production does not alter the likelihood that GDP fell sharply in Q4, but it does add to signs that the economy entered 2013 in a slightly better state. … German Industrial Production …
The rise in the euro is not unambiguously bad for the euro-zone economy. But the negatives are likely to outweigh the positives. … The strong euro won’t be all bad - just …
6th February 2013
The latest hard data have confirmed that the euro-zone ended 2012 on a very weak note, but survey indicators for January have brought further evidence that the pace of contraction eased at the start of this year. The German surveys have been particularly …
While the recent slight reduction in TARGET2 imbalances echoes other signs of improvement in the euro-zone, they still point to serious underlying problems in the economy and banking sector. … TARGET2 still points to big …
5th February 2013
December’s fall in euro-zone retail sales confirmed that the consumer sector remains under strain and supported other evidence that GDP fell sharply in Q4. But January’s final PMI survey added to hopes that the pace of contraction will slow in Q1. … …
Last week’s euro-zone data confirmed that the economy will probably fare better in Q1 than in Q4 2012. But for now at least the euro-zone business surveys remain in recession territory. Of course, if the business surveys continue to rise, they might point …
4th February 2013
January’s fall in euro-zone inflation is good news for consumers, but with unemployment still at a record high in December, incomes and spending will remain under severe strain. … Euro-zone Flash CPI (Jan.) & Unemployment …
1st February 2013
The continued improvement in financial market conditions and surveys of economic activity has taken some of the pressure off the ECB this month. We expect the Bank to strike a relatively hawkish tone after its forthcoming meeting, stating that no further …
31st January 2013
January’s rise in the euro-zone EC Economic Sentiment Indicator (ESI) provided further evidence that the improvement in market conditions seen over recent months is starting to have a moderately positive effect on the economy. … Euro-zone EC Survey …
30th January 2013
The latest fiscal news from the periphery suggests that Greece, Ireland and Portugal met their fiscal goals for 2012 as a whole. … Euro-zone Fiscal Monitor (Jan. …
29th January 2013
The euro’s appreciation over recent months may not necessarily prove disastrous for exporters. But with domestic demand likely to continue to contract, the strong currency reduces the chances of the euro-zone embarking on a lasting economic recovery in …
Recent economic data suggest that France is lagging further behind Germany. If anything, we suspect that this gap will widen as the year goes on, leading tensions between the two countries to rise. … Gap between Germany and France to …
28th January 2013
The latest euro-zone monetary data have brought further signs of an improvement in financial market conditions. However, lending to firms and households has continued to fall and seems unlikely to recover in the near future. … Euro-zone Monetary …
The ECB’s apparent refusal to engage in the recent outbreak of covert currency wars amongst global policymakers is partly understandable. After all, the single currency’s recent rise has been at least in part an endorsement of the ECB’s own efforts to …
January’s increase in the German Ifo business climate index provides further hope that the economy will fare better in Q1 than Q4. … German Ifo Survey …
25th January 2013
The expected repayment of some ECB LTRO funding should add to signs that the region’s banking system is on the mend. But it will also underline the weakness of demand in the region and could fuel fears that the ECB is lagging further behind other …
24th January 2013
January’s flash euro-zone Purchasing Managers’ Indices (PMIs) provided further evidence that the pace of contraction in the euro-zone economy has decelerated at the start of this year. But it is too early to conclude that a meaningful and lasting recovery …
While the improvement in financial market sentiment seen over recent months should have some beneficial effects on the euro-zone’s troubled economies, hopes that a “virtuous circle” will bring an end to the debt crisis almost certainly underestimate the …
23rd January 2013
The 0.6% contraction in Spanish GDP in Q4 last year serves as a timely reminder that, while market pressures on the country have abated in response to the ECB’s promised intervention, the underlying economic outlook remains extremely weak. … Spanish GDP …
January’s sharp rise in German ZEW investor sentiment suggests that activity may have improved at the start of 2013 following a very weak end to last year. … German ZEW Survey …
22nd January 2013
Yesterday’s narrow loss for Germany’s current governing coalition in the state of Lower Saxony added to evidence that September’s general election could result in a change of government. While Angela Merkel will almost certainly stay in power, she might …
21st January 2013
Last week’s news that German GDP rose by 0.7% in 2012 clearly confirmed that the economy broke no records. But it did well to continue growing at all in such a weak economic and political climate. What’s more, growth last year was driven not only by …
The Troika and the Cypriot Government have reached a stalemate, with the latter refusing to agree to the terms for a vital bail-out. An agreement should be reached after next month’s election and Cyprus reportedly has enough money to last it until then. …
17th January 2013
While the euro may well strengthen further in the near term, we still expect it to weaken again later in the year as worries over the currency union resurface. In the meantime, though, the strong currency is another factor hindering a vital return to …
15th January 2013
The latest euro-zone trade data and the 2012 German GDP figures do nothing to alter the view that the euro-zone economy ended the year on a low note. … Euro-zone Trade Balance (Nov.) & German GDP …
November’s euro-zone industrial production data provided further strong signs that the recession in the region as a whole intensified in the final quarter of last year. … Euro-zone Industrial Production (Nov. …
14th January 2013
The ECB’s comments last week dealt a blow to any hopes that it might provide more support to the euro-zone economy. With financial market conditions improving, the Bank no longer seems to be considering interest rate cuts and is unlikely to adapt its …
Recent months have seen a small, but encouraging, improvement in some euro-zone activity indicators, particularly in the peripheral economies like Greece. However, in most cases, those indicators remain consistent with very weak growth, if not deep …
10th January 2013
The European Central Bank (ECB) appears content to sit on the sidelines for now and hope that the recent stabilisation of the euro-zone debt crisis continues. Eventually, however, President Draghi’s pledge to do whatever it takes to preserve the euro will …
While the lull in the euro-zone debt crisis has continued in recent months, the news on the region’s economy has remained distinctly downbeat. Despite some improvement towards the end of last year, activity indicators remain generally consistent with a …
9th January 2013
This report is only available as a PDF. Click to download. … German Industrial Production (Nov.) …
Despite the small rise in economic sentiment in December, the latest batch of eurozone data still presented a decidedly downbeat picture of the state of the currency union’s economy at the end of last year. … Euro-zone EC Survey (Dec.), Unemp. & Retail …
8th January 2013
Euro-zone policymakers have created a bit of breathing space for themselves in the latter half of 2012, but we think that there are a number of potential stumbling blocks on the horizon which could potentially prompt the crisis to re-escalate … Euro-zone …
7th January 2013
The news that both activity and inflation in the euro-zone remained subdued at the end of last year will increase the pressure on the European Central Bank to provide further policy support ahead of next week’s Governing Council meeting. … Euro-zone …
4th January 2013
Having prevented catastrophe in 2012 by pledging to do whatever it takes to save the euro, the European Central Bank will have to follow words with actions in 2013. While no policy changes are likely at the first Governing Council Meeting of the year on …
3rd January 2013
The latest fiscal data support the view that both Italy and Spain will fail to meet their fiscal goals for 2012 as a whole. … Euro-zone Fiscal Monitor (Dec. …
The latest euro-zone monetary data brought no signs of any easing in the severe credit constraints facing both households and companies in the single currency area. … Euro-zone Monetary Indicators Monitor (Nov. …
Mario Monti’s widely expected decision to head a “centrist alliance” probably increases the chances of Italy continuing its reform process, but the political situation remains uncertain. What’s more, regardless of the outcome of February’s election, 2013 …
2nd January 2013
