Economy

Shortage of qualified labour threatens growth in Eastern Europe

From the point of view of workers, the situation in the labour markets of Eastern Europe has rarely been so good. In the last few years, unemployment rates in Poland, the Czech Republic and Hungary have declined steadily. In the Czech Republic, there is virtually no spare capacity left in the labour market. Not only has the ratio of unemployed people to working-age population reached an historical low of 2.2% recently, the country’s unemployment rate is the lowest in the EU. However, Poland and Hungary also have unemployment rates of under 4% and more or less full employment. The downside of this is that companies operating in Eastern Europe are finding it increasingly difficult to find suitable staff. The shortage of qualified labour is widespread and it is nothing new: many companies have been complaining about the problem for some time in surveys. The exponential rise in the number of…

Euro area: downward trend of our leading economic indicators continues

GDP growth is likely to continue to weaken in the euro area at least until spring 2019. This is shown by the current data for DZ BANK’s Euro-Indicator, which fell for the tenth consecutive time in November. The Euro-Indicator has recently shed 0.2 percent, falling to a level of 99.3 points and is thus now 2.0 per cent lower than in the previous year. As our leading indicator is able to forecast the economic trend for the coming one to two quarters with a high degree of reliability, no growth trend reversal may be expected in the euro area until spring 2019 at the earliest. In November six of our nine individual indicators charted a weaker trend. However, unlike in the previous months, the downside movement did not start in the industrial sector this time. Whereas all three key metrics from the manufacturing industry (incoming orders, production forecasts, purchasing managers’…

Euro area inflation at 2% – domestic price pressure remains low

The flash estimate for consumer price inflation in the euro area was 2% in November and therefore 0.1 points lower than in the previous month. At 9.1%, energy prices in the basket of consumer goods rose again sharply, albeit not to the same extent as in October, when they climbed by 10.7%. Food products inflation was also somewhat more moderate at a high level, while the increase in services inflation was weaker. Inflation has therefore been above the ECB’s target of “below, but close to, 2%”, for six months now. Nonetheless, domestic inflationary pressure in the EMU remains muted. This is evident from the core rate of inflation, which excludes the more volatile price components of unprocessed food and energy products. It fell from 1.2% to 1.1% in November. Stronger inflationary pressure would require a much stronger and more permanent increase in the core rate, and there is still no…

Ifo survey: Autumnal wind blowing in the face of the German economy

After the dampener in the summer quarter, German economic data has so far not yet shown any signs of recovering in the autumn. The current ifo survey for November posts the third consecutive dip in business sentiment, something that is usually read as confirming a downward trend. The survey levels fell as regards both the assessment of the current business situation and expectations. German companies remain sceptical with a view to the coming months, which is presumably above all due to the various negative international factors. In particular the stuttering Brexit talks and the EU-critical statements by Italy strained economic sentiment in November. However, the prospects could brighten a bit toward the end of the year. If the draft Brexit deal gets approved by the British parliament and the recently somewhat more conciliatory sounds coming out of Rome firm up in the coming weeks, this should boost sentiment in Europe…

Purchasing managers’ indices: slowdown continues, especially in the manufacturing sector

The purchasing managers’ indices in the eurozone continued to decline, as shown by the flash results in November. The PMI Composite index, which aggregates sentiment for the eurozone, fell from 53.1 to 52.4 index points. According to the survey, production growth in the manufacturing industry continued to weaken. The corresponding sub-index fell to its lowest reading in 30 months. The low growth rate is attributable to slower economic momentum worldwide and to growing political and economic uncertainties. Weaker sales figures in the automotive sector are also causing concern among the industry’s purchasing managers. The service sector is more robust, thanks to solid consumer demand, although Markit suggests there are increasing signs of a slowdown. German purchasing managers appeared to be more sceptical in November. Sentiment in the manufacturing industry as well as among service providers deteriorated. The comprehensive purchasing managers’ composite index thus fell from 53.4 to 52.2 index points,…

The ECB continues to be optimistic

Despite weaker incoming economic data, the ECB sees underlying growth momentum consistent with a scenario of an ongoing broad-based economic expansion. It is true that the ECB’s top echelons have gone on record as saying that the economic trend is being affected by uncertainties and fragilities. They conclude, however, that the risks surrounding the growth outlook can still be assessed as broadly balanced. Despite this outlook, participants at September’s Governing Council meeting pointed to the threat of protectionism, vulnerabilities in certain emerging markets and persistent financial-market volatility. By contrast, there was no focus on the turbulence emanating from Italy. Although yields in one large EMU member country had risen, other Euro area sovereign bond markets had not been affected by this. Mario Draghi and his team will revise their assessment of the economic trend in the light of the new ECB staff projections which are due out in December. The…

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