Euro zone

DAX before record level – what now?

The less dynamic global economy is weighing on domestic exports. The so important automotive industry is undergoing long-term structural change – with an uncertain outcome – and many companies in the DAX are still struggling with homemade problems. Trend themes in technology, the Internet and other sectors are being driven forward in the USA and China, not in Germany. No wonder that the soon to be highest level in DAX history feels somewhat wrong. After all, the profits of DAX companies have been falling for a good three years. Without wanting to get close to the guarantors of success in the index (SAP, Allianz, Adidas or Siemens), who were able to more than compensate for the price losses of the „underperformers“: In fact, a significant part of the DAX upturn is not due to the „sexiness“ of the index companies, but rather to the fact that the DAX is a…

Purchasing managers in the EMU are cautiously optimistic

At first glance, the mood among purchasing managers remains subdued at the beginning of the new year 2020 according to the survey by IHS Markit in the euro zone. The comprehensive composite purchasing managers‘ index on the situation in industry and services remained at the previous month’s level of 50.9 points in January according to the preliminary publication. In detail, however, the business outlook is brightening, probably also due to the initial de-escalation in the Pacific trade dispute. Another ray of hope is the development of incoming orders, which the purchasing managers surveyed are no longer as pessimistic as in previous months. At least for the rest of the year, this gives reason to hope that the economy in the euro zone has put the worst behind it and is continuing to stabilize. It is true that the dichotomy between weak industry on the one hand and a service sector,…

Initial concerns about negative interest rate policy are becoming apparent in the ECB

The summary of the ECB’s last Council meeting in December (accounts) does not provide any indication of an early change in the monetary policy stance. The monetary watchdogs continue to expect continued weak growth momentum in the euro area, but at least the first signs of economic stabilisation have been identified. In this context, reference is made to the rapprochement in the trade dispute (China/USA), which has made an escalation of the conflict less likely. However, as uncertainty factors (including brexite) continue to exist, the economic outlook is still subject to downside risks. With regard to the inflation trend, the monetary authorities are convinced that a stronger upward trend in prices can be expected in the coming months. The ongoing economic growth and solid wage development would support this trend. In the course of the discussions, some Council representatives suggested that the causes of the persistently low level of inflation…

The ECB has changed

In the wake of the financial crisis, the ECB has noticeably changed its behaviour and its reaction function and monetary policy has undergone a structural break. Whereas in the first decade of the central bank’s existence there was still a close alignment between economic development and monetary policy orientation, the last ten years have seen an increasing decoupling of monetary policy from real economic events. One reason for this lies in the asymmetrical reaction function of the currency guardians. In economic downturns the ECB reacts faster and more strongly than in upswings. This was particularly noticeable both in the fading financial crisis and in 2015, when the ECB announced its entry into the PSPP despite the upswing, but out of concern about deflationary risks. Despite the zero interest rate policy and the extensive use of unconventional measures, the ECB has not yet succeeded in halting the trend of falling inflation…

Euro area inflation rate leaves three-year low

  In November, the inflation rate rose again somewhat. According to the flash estimate, consumer price inflation in the euro zone was 1.0% last month, after 0.7% in the previous month. This rise in inflation is due to stronger dynamics in the prices of unprocessed food and services. The price development of other goods remained moderate. By contrast, energy prices fell again by a similar amount as in the previous month. This is mainly due to the lower crude oil price compared to the previous year, which was reflected in the petrol stations. The rate of inflation has recently accelerated somewhat in all major member states. In Germany and France the annual rate rose from 0.9% to 1.2%. In Spain the rate rose from 0.2% to 0.5% and in Italy from 0.2% to 0.4%. Overall, however, inflation in the euro zone remains subdued despite the recent rise. In the case…

Purchasing managers in the euro zone: mood remains „autumnal

The private sector in the euro area is not yet benefiting from any easing. This is signalled by current survey results among purchasing managers (PMI). In October, the comprehensive „composite PMI“ reached a value of 50.2. This is a weak increase of 0.1 points compared to the previous month. This does not change much about the picture of „cautious confidence“ in the EMU economy. Business prospects remain gloomy, mainly due to the global trade conflicts, the „Brexit drama“ and general concerns about a global slowdown in growth. However, the PMI results also suggest that the latest reports on possible (partial) solutions to the US-China trade dispute have not yet been fully reflected in the October survey results. However, it is precisely this news that has the potential to loosen the loop around European industry to some extent. Developments in the two largest EMU economies have been mixed. Hopes for a…

1 2 53