Euro zone

Italy: Investors turn away

The Italian government is on the verge of collapse. After weeks of quarrels, Interior Minister Salvini yesterday called for new elections, effectively announcing the end of the coalition between the Lega and the Five-Star Movement (M5S). The latest dispute was triggered by the M5S’s decision not to approve the major TAV railway project. In the meantime, Prime Minister Conte has announced that he will ask Parliament the question of confidence, which he is very likely to lose. If the end of the coalition is officially confirmed, President Mattarella has the ball rolling. He must officially sound out possibilities for forming a new government or otherwise declare new elections. Since new majority constellations in parliament, such as an alliance between PD (centre-left) and M5S, are unlikely, new elections in mid-October are already being discussed. Until the ballot, the president could set up an expert government that would run the business, but…

ECB changes inflation management

If the recent press conference by ECB President Mario Draghi showed anything, it was that the monetary authorities are anything but satisfied with the inflation trend. Inflation expectations, in particular, are a cause for concern as they have now fallen below the levels that would have been reached at the time of the launch of the The main factors were the bond purchases and the increase in bond purchases from EUR 60 billion to EUR 80 billion. The monetary authorities have taken various measures to ensure that inflation expectations do not lose their roots. Only in June was the forward guidance extended to mid-2020. In addition, the ECB had new TLTROs on the way. However, all these measures seem to have had little effect, as inflation expectations have continued to fall. This development could, in the final analysis, indicate that market participants fear that the ECB has lost control over…

EMU economy still unable to find a foothold

The outlook for the economy in the euro zone deteriorated further in July. This is shown by DZ BANK’s euro indicator, which fell by 0.3 percent in the past month. The leading indicator for economic development is now at 98.4 points, the lowest level for around three years. The annual rate of change also declined slightly in July, falling from -1.8 to -1.9 percent. As in previous months, the industrial sector was particularly weak. Incoming orders declined and companies further reduced their production expectations for the coming months. The purchasing managers surveyed by IHS Markit were also more pessimistic. In July, the purchasing managers‘ index for the euro zone fell to its lowest level since December 2012. According to the respondents, the ongoing trade conflicts, the crisis in the automotive industry and political uncertainty damaged domestic and export demand. Meanwhile, the financial markets showed a mixed picture last month. While…

Economic slowdown in the euro zone continues

The economic slowdown in the euro zone is progressing. At 0.2 percent, growth in the euro zone in the second quarter of the current year was only half as high as in Q1 compared with the previous quarter. Not surprisingly, the domestic economy supported growth, while net exports were more likely to dampen growth. This is consistent with the general picture of a rather difficult international environment hampered by geopolitical economic risks and protectionist tendencies. Data from the euro area suggest slightly positive economic growth in Q2 in Germany. The outlook for the economy in the euro zone is not promising. Almost all relevant leading indicators in the euro zone have fallen in recent months and point to a further slowdown in growth, with industry in particular suffering from weak world trade. However, a slowdown in growth momentum can also be observed in the domestic sectors in the meantime. The…

Eurozone: Economy and inflation „running out of steam“ – Italy remains growth taillight

Economic growth in the euro zone slowed markedly in the spring. At a meager 0.2% compared with the previous quarter, growth was only half as high as in the first quarter of 2019. Details are not yet available with the preliminary estimate. However, it appears that domestic demand continued to be supportive, while net exports tended to slow. This is consistent with the general picture of a rather difficult international environment hampered by geopolitical cyclical risks and protectionist tendencies. A guarantor for steady domestic demand in the euro zone remains – at least for the time being – the well-functioning labour market and gradually rising wages. But the ongoing boom in the construction sector is also maintaining investment activity. First country results had already indicated the weakened quarterly result for the euro zone. Economic growth in France fell from 0.3% to 0.2%. Italy is stagnating and is therefore likely to…

Euro zone: Will the upturn in the labour market end?

For several years now, the unemployment rate in the euro zone has actually been heading in only one direction: it is going downhill almost unchecked – in a positive sense. If the trend continues, the pre-crisis level of 7.3 percent from March 2008 should be reached in two to three months. However, an end to the recovery phase seems to be gradually approaching. The indicator we have calculated for the unemployment rate in the euro zone has been pointing for months to a noticeable slowdown in the downward trend, which should increasingly visibly turn into bottoming out. The number of euro countries in which the recovery in the labour market is intact still predominates. However, a number of countries have already achieved very low unemployment rates in the past two years. Here, historic lows have already been reached or there is virtually full employment. A further contribution to reducing the…

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