Euro zone

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…

High Noon in Westminster

What is happening over Brexit has more suspense than any whodunnit – first the tough, long-drawn-out negotiations in Brussels and now the showdown in the British parliament. Now as before, Brexit is turning out to be a first-class political drama, whose provisional climax is due on 11th December. That is when the House of Commons will be voting on the EU withdrawal agreement. The situation does not look all that rosy. Various members of parliament are fighting tooth and nail against the proposed deal, albeit for very different motives. The faction of Brexit hardliners is fearful that the Irish backstop mechanism is a trap, committing Great Britain to a customs union with the EU in all eternity. Those who advocate a soft Brexit, by contrast, are hoping for a second referendum  – maybe to even be able to stave off an EU exit scenario. Meanwhile, Theresa May is attempting to…

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,…

Gibraltar in Brexit focus prior to EU Special Summit

On Sunday, the EU special summit marks the next important hurdle for Britain’s exit process. Then, the heads of state and government of the remaining 27 member states of the European Union are intended to give their agreement to both the EU exit deal with Great Britain and to the political declaration on the future partnership. Federal Chancellor Merkel has already stated that she has no intention of travelling to Brussels in order to conduct negotiations. There is correspondingly high pressure to definitively eliminate the existing differences in advance. This also explains the announcement by Prime Minister May that she will be heading to Brussels again on Saturday evening in order to discuss with European Commission President Juncker any further matters “that require a solution”. Political declaration on future partnership finalised It did not transpire until yesterday that the European Commission and the British negotiators had agreed on the text…

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