Euro zone

EMU Purchasing Manager: Second wave depresses the mood among service providers – Industry proves robust

Uncertainty is increasing among European service providers due to the rising number of infections in October. The tightening of corona protection measures is causing the purchasing managers‘ index for the service sector to fall significantly. In some countries, the catering and accommodation sectors are noticeably restricted. In addition, there are in some cases night-time curfews. With Ireland and the Netherlands, two countries are already in a kind of lockdown. This leaves traces and puts pressure on the sentiment among service providers. In industry, on the other hand, the sentiment measurement figures may even increase and prevent worse for the overall picture. According to IHS Markit, the comprehensive composite index from both sectors fell from 50.4 to 49.4 points in October. At the beginning of the fourth quarter, the growth prospects for the euro zone thus deteriorate. As there is no end in sight to the rising infection figures, further intensification…

Youth unemployment is becoming a problem in the euro zone

The corona virus caused severe economic setbacks in economies around the world in the first half of the year. In the euro zone, extensive measures were at least able to protect the labor market from more serious distortions. But things are by no means going equally well for all age groups. Particularly in the group of under 25-year-olds, a fairly rapid increase in the EMU unemployment rate has been recorded since the lockdown measures starting in March. One of the reasons for the rapid deterioration in youth unemployment is the fact that companies in Corona times provide significantly fewer training places due to increased uncertainty. This poses a particular challenge to all those who left school after graduating in Corona summer and find it difficult or impossible to find an apprenticeship. In addition, fixed-term employment contracts are hardly ever extended in these uncertain times. The danger here is that these…

EMU inflation rate remains negative in September

  In September, the inflation rate in the euro zone remained negative at -0.3 percent. In the previous month it had already been -0.2 percent. Energy prices once again contributed to the price reduction with a strong year-on-year decline. The rate of inflation for industrial goods was surprisingly weak following the postponement of the summer sales and fell again. In some countries, summer sales probably even extended into September, pushing prices down even further. The upward trend in prices for services, which are still plagued by corona, weakened once again. For food alone, consumers recently had to dig a little deeper into their wallets. The slowdown in the price of goods and services also affected the core rate, which fell from 0.6 to 0.4 percent in September This picture is almost uniform in the large member states of the euro zone: overall, there is little or no pressure on prices….

Renewed wave of infection is a threat to economic recovery in France

After a sharp decline in the first quarter, France’s economy literally plunged by 13.8 percent in the second quarter compared to the previous quarter. Such a sharp decline has not yet been measured. The reason for this was the strict and ongoing corona protection measures. According to calculations by the Banque de France, the lockdown in March reduced economic activity by around 30 percent and in April by 27 percent compared to a „normal“ week. In the meantime, however, the economy has already reached more than 90 percent of the normal level again. The initial rapid start of the economic engine was reflected in the usual economic indicators. Industry has already been able to make up a good deal of the decline in production. Incoming orders have also already increased. In addition, consumers are now more willing to spend. Overall, the French economy is recovering, but the momentum currently seems…

Delayed summer sales push inflation rate below zero in the EMU

  Inflation in the euro zone weakened quite considerably in August. The Harmonized Index of Consumer Prices (HICP) in the monetary union fell from +0.4 to -0.2 percent. Overall inflation is still being dampened by the low level of energy prices. However, the bulk of the decline in many countries is attributable to the late summer sales, which were postponed from July to August as a result of the corona pandemic. In the consumer basket of goods, there was a significant fall in the price of non-energy industrial goods. These are typically the goods of the classic retail trade. While clothing and shoes were unusually expensive in Italy and France in the previous month, for example, and thus gave a noticeable boost to the overall inflation rate, the upturn in prices fell significantly with the summer sales in August. On a country level, the corrections were felt in annual rates…

Keep full throttle, but not more

As we expected, the ECB has left its press statement and thus also its forward guidance (except for five words) unchanged. Accordingly, the markets have reacted rather cautiously. The purchasing programs and liquidity measures are continuing at full speed. Nor was it necessary to inject nitrous oxide for even more horsepower. The economic data are within the range of the ECB’s baseline scenario, which is why no adjustments to monetary policy are yet necessary. The ECB will keep this in check should the pandemic cause further, unforeseen economic damage. In principle, however, we assume that the ECB will have to make further adjustments to its purchasing programs by the end of the year (PEPP expires in the summer of 2021) in order to provide further support via the credit channel for the economy, which will still be weak next year. Lagarde also confirmed this prospect in the press conference, emphasizing…

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