Weak industrial performance continues to weigh on EMU economy

Autumn grey tones dominate the economic picture in the euro zone in September 2019. The brightening in August was therefore only temporary. At any rate, this is the result of our calculations for the DZ BANK Euro Indicator, which can indicate economic turning points at an early stage. In the past month, the euro indicator fell by 0.2 percent. With a value of 98.5 points, it is almost exactly at the July level and thus the lowest level for around three years. Compared to the previous year, the indicator lost 1.5 percent. The gap in the J/J rate has narrowed since the beginning of 2019, indicating that at least the pace of economic deterioration has slowed in recent months.

In August, surprisingly positive data from the industrial sector set the tone and boosted the euro indicator. In September, industry data now pointed in the opposite direction again. The survey of purchasing managers in the manufacturing sector shows that the mood there is worse than it has been for around seven years. Incoming orders were again more sparse, and production expectations for the coming months are more subdued than they have been since 2013. The industrial slowdown is therefore continuing, even though most indices have not yet reached their lows from recent recessions.

Weak signals also came from the European labour markets, where the number of vacancies has recently declined. Building permits also declined somewhat in the past month.

Meanwhile, the four other components of the euro indicator improved somewhat in the past month. According to the MSCI index, share prices in the EMU rose by an average of a good four percent in September. For the first time in almost a year, yields on long-term German government bonds have also risen slightly, while the money market interest rate has fallen slightly for three months. However, the interest rate differential between the capital market and the money market remains negative, meaning that the yield curve is inverted. At the same time, growth in the real money supply M3 accelerated further.

Finally, according to the latest survey commissioned by the EU Commission, consumers remain quite confident. The indicator for consumer confidence rose slightly in September – above all because private households are slightly more positive than in the previous month, both in terms of the economy as a whole and in terms of their own financial development.

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