A lower momentum for the Euro Area during the second quarter

GDP growth for the Euro Area was confirmed at 0.3% (flat) for the second quarter of this year (2.2% at annual rate).
The table below shows growth figures for different countries of the Euro Area.
In the largest Eurozone countries there is a slowdown during the second quarter. This is the case for Germany (from 2.9% to 1.7%), for France (+2.7% to -0.2%) for Spain (from 3.1% to 2.8%) and for Italy (from 1.1% to 0%) Growth is stronger in other countries.
Carry over for 2016 at the end of the second quarter is 1.3% for the Euro Area but 1.5% for Germany and 2.6% for Spain; but just 1.1% for France and 0.6%% in Italy. For other countries it is circa 1% except for Greece where it is still negative. Continue reading

Landmarks on Euro area growth in the first quarter

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

Four Graphs on the Euro Area Growth Momentum

Euro Area GDP was almost stable during the second quarter (+0.2% at annual rate) after a slight increase of 0.8% during the first three months of this year. Compared to the second quarter of 2013, GDP is up by 0.7%. Carry-over growth for 2014 is 0.6% at mid-year (Carry-over growth at the end of the second quarter is the average annual growth if GDP level remains at Q2 level in the third and the fourth quarters. It’s a useful approximation)

The first chart shows GDP level at constant price. The red line is the trend calculated from 2000 to the first quarter of 2008 and prolonged until the second quarter of 2014. The gap between the observed GDP and the trend is -12% at the end of the first half of 2014. This is huge and we do not see any convergence between the two lines. It is more a divergence than a convergence. The line in blue is another trend that shows the momentum of the recovery in 2009 and 2010 and the break after the first three months of 2011. There is gain a divergence here. Since the first quarter of 2011, GDP is down by -0.36% (-0.1% at annual rate). The current recovery seen since the first quarter of 2013 is following a mild dynamics. From that date, average growth is 0.8% at annual rate. It is still far from the 1.9% which was the trend growth rate seen before the crisis. Continue reading

Euro Area – PMI Survey – The momentum is weaker and the horizon more foggy

The manufacturing index of the PMI/Markit survey is losing steam. Its peak was seen at the beginning of this year. This lack of momentum can also be perceived in the manufacturing part of the IFO survey in Germany and in the INSEE survey in France.
That’s what the first chart below shows. The level of the three index are different but the three profiles are consistent. For the three the short-term trend is on the downside.
We also see that the PMI index is close to its historical value (0 on the chart). It doesn’t reflect a strong momentum or a forthcoming robust impulse on economic momentum. Continue reading

GDP Dynamics in the Euro Area

Usually a nice chart gives a lot of information. This succession of 9 charts is targeted to give you a very simple but persuasive view on the economic dynamics in the Euro Area.
GDP growth numbers have been stronger than expected for a bunch of countries and for the Euro Area as a whole.
This simultaneity means that the reduction in uncertainty is an important source, an important contribution for this improvement. There are a lot of new institutions that were put in place during the last year. They have dramatically reduced the risk of a Euro burst. So the economic horizon for households and for companies is no more limited by this systemic uncertainty that was perceived a year ago. Nevertheless, this does not mean that we are at the eve of a strong and durable recovery. Companies’ investment is still too low to witness a long-lasting recovery. That’s the point to look at in the next couple of quarters. During this period governments have to adopt a more business friendly attitude in order to let the economy improves by itself. It’s not time to change again the global framework if the target is to reduce uncertainty to favor investment and then employment. We don’t need more austerity that can be interpreted as negative shock on the economy. Targeted budget balances have to be conditioned by growth, not the contrary.
The very positive point for the Euro Area outlook can be seen in companies’ surveys. Continue reading