Growth figures in the Euro Area have been pretty good during the first quarter. The trend has dramatically accelerated in Spain, France is out of a long period of very low momentum and Italy is out of its recession.
Nevertheless, even with these good news, it is too early to be sure that the long stagnation that has characterized the Euro Area since the first quarter of 2011 is over. Austerity policies that were put in place at this moment have provoked a long recession in the Euro Area. The exit from this episode may start in 2015 with the new ECB monetary policy that focus on demand. 4 years to exit from the negative impact of these austerity policies that imagined that reduction in demand could imply a strong growth momentum (sic)
The current economic policy put demand at the front place to try to change the business cycle profile. I think that this is the best recipe to converge to a more virtuous business cycle.
This post wants to show the economic activity profile in the Euro Area and its main countries at the end of the first quarter. I do not give details of on composition of growth because usually only the GDP number has been published.
GDP Quarterly change
This graph shows the GDP quarterly change at annual rate. The red bar for the first quarter of 2015 shows strong performance in Spain, France and Italy. The German number is below expectations. Continue reading →
The first chart compares industrial production’s profiles in Europe. It shows the main Euro Area countries plus the United Kingdom. With the exception of Italy for which economic outlook is still problematic, we see a real recovery in Germany, in the United Kingdom and in Spain even if for this latter the level of activity is still very low. The French index is lagging and doesn’t seem to participate to the same momentum.
The 0.3% seen in April for the industrial and the manufacturing indices doesn’t change the picture. The puzzling issue is that in June 2013, the UK and French levels were the same. Now, in April, the gap is more than 3%. Continue reading →
The graph below summarizes the perception that one can have of the manufacturing sector after the publication of surveys from Markit and ISM for the month of November. Numbers are better oriented, tending to move permanently above the 50 threshold separating improvement and deterioration of the outlook in the manufacturing sector. However, the multiplicity of indices do not allow an easy reading.
I took the main indices and observed that they were all trending upward even if the pace is not the same everywhere. To visualize this shift I drew heuristically a yellow band that reflects this new dynamic. It has no scientific virtue but helps guide your eye on the change that is taking place.
The activity was higher in 2009/2010, slowed in 2011 until the spring of 2013 with this yellow band close to the threshold of 50. Subsequently economic activity has improved, driven by the United Kingdom, the United States and even Japan. The Euro Area and BRIC are a little late. The yellow band is now following an upward trend.
The whole reflects a more robust common momentum where risks of rupture are reduced. At this stage it is important to note that global dynamics may become stronger rapidly. Everyone must then contribute to it to its improvement .
United Kingdom GDP grew by 0.8% (3.2% at annual rate) during the third quarter (preliminary estimate) . In the second quarter it was 0.7 % (2.8% AR). We see on the first chart a nice sequence of three successive increases in GDP. Compared to the third quarter of 2012, growth is 1.6%. Carry over growth is almost 1.3% for 2013 at the end of the third quarter (This is a measure of the average growth for 2013 if Q4 GDP remains at Q3 level). GDP level is still 2.5% below it Q1 2008 peak.