eurozone Archives - Pat Carroll PCCO - Chartered Accountants & Tax Advisors

Euro zone GDP slows as expected in fourth quarter

Euro zone economic growth slowed as expected in the last three months of 2019 as gross domestic product shrank in France and Italy compared to the previous quarter.

But employment growth picked up more than expected, official estimates showed today. 

The European Union’s statistics office Eurostat said GDP in the euro zone expanded 0.1% quarter-on-quarter in the three months from October to December, as announced on January 31.

This gave a 0.9% year-on-year gain – a downward revision from the previously estimated 1% growth. 

The quarterly growth rate slowed compared to the 0.3% expansion in the third quarter because of a 0.1% contraction in the second biggest economy France and a 0.3% contraction in the third biggest Italy. 

Growth in Germany, the biggest euro zone economy, stagnated. 

Eurostat also said that euro zone employment rose 0.3% quarter-on-quarter in the last three months of 2019 for a 1% year-on-year gain. 

Economists polled by Reuters had expected a 0.1% quarterly rise and a 0.8% annual increase. 

Separately, Eurostat said the euro zone’s trade surplus with the rest of the world was €23.1 billion in December, up from €16.3 billion a year earlier.

This brought the total for the whole of 2019 to €225.7 billion, up from €194.6 billion in 2018.

Adjusted for seasonal factors, the trade surplus was €22.2 billion in December, up from €19.1 billion in November as exports rose 0.9% on the month and imports fell 0.7%.

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EU leaves euro zone growth forecast unchanged for this year and next

The European Commission has today kept its economic forecast for moderate euro zone growth for this year and 2021. 

But it raised slightly its projection for inflation, noting the spread of the coronavirus was the key downside risk. 

In an interim outlook for gross domestic product (GDP) growth and consumer inflation for the 19 euro zone countries for 2020 and 2021, the Commission said growth in the euro zone would remain at 1.2% this year and next, as in 2019. 

“The outlook for 2020 and 2021 is unchanged as more positive developments are counterbalanced by negative events elsewhere,” the Commission, the EU’s executive, said. 

Inflation is likely to accelerate slightly, the Commission said, because of the likelihood of higher oil prices and the effect of higher wages passing through to core prices. 

The Commission raised its forecast for consumer price growth to 1.3% in 2020 and 1.4% in 2021 from 1.2% and 1.3% respectively predicted last November. 

The European Central Bank wants to keep inflation below, but close to 2% over the medium term, and has been buying government bonds on the secondary market to inject more cash into the banking system and stimulate lending. 

“Still, domestic price pressures are expected to build up only slowly as firms are likely to continue tolerating lower profit margins,” the Commission said. 

The EU executive said that while the first phase of a trade deal between the US and China helped reduce risks to some extent, the spread of the Wuhan coronavirus was now the main threat to the growth forecast. 

“The baseline assumption is that the outbreak peaks in the first quarter, with relatively limited global spillovers. The duration of the outbreak, and of the containment measures enacted, are a key downside risk,” the Commission said. 

“The longer it lasts, the higher the likelihood of knock-on effects on economic sentiment and global financing conditions,” it added. 

The Commission also said that while trade relations between the EU and Britain, which left the bloc on January 31, were governed by the transition period agreement until the end of the year, there was “considerable uncertainty” as to what trade deal, if any, would be in place from the start of 2021.

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Euro zone industrial output tumbles more than expected in December

Euro zone manufacturing output plunged more than expected in December ending a weak quarter for the single currency area, official estimates showed today. 

Industrial production fell 2.1% month-on-month in the euro zone, the EU statistics agency Eurostat said, in a slump that was worse than the 1.6% fall predicted by economists polled by Reuters. 

Year-on-year, output fell 4.1% – much more than market forecasts of a 2.3% drop. 

The negative monthly reading followed a 0.9% drop in October and a stalled production in November, which was revised down from the previously estimated 0.2% rise, as euro zone manufacturers were battered by global trade tensions. 

Production in December fell significantly in all major economies in the bloc, pointing to a possible downward revision of gross domestic product (GDP) growth for the last quarter. 

At the end of January, before the output data was known, Eurostat estimated the euro zone grew 0.1% in the last quarter. 

The December fall was driven by a 4.0% drop in the output of capital goods, which implies lower investment appetite among industry managers. 

Despite the bad end of the year, businesses were upbeat in January according to sentiment indicators released in past days, in a sign that abating trade tensions between the US and China may boost morale. 

The effects of the coronavirus outbreak remain, however, unclear.

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Euro zone investor morale falls in February on coronavirus fears – Sentix

Investor morale in the euro zone fell for the first time in four months in February over fears that China will not be able to contain the coronavirus outbreak, a survey showed today. 

Sentix’s index for the euro zone fell to 5.2 from 7.6 in January. The Reuters consensus forecast was for a fall to 4.1. 

The slight drop reflects the fact that investors think the economic damage from the novel virus has been mostly limited to China, said Sentix chief Manfred Huebner.

The global economy was getting impetus from the US, he added.

“The outbreak of the coronavirus and the subsequent drastic measures taken by the Chinese government cast a shadow over the economic outlook,” Mr Huebner. “Fortunately, so far the effect is limited.” 

“However, in view of the significant declines in Chinese economic data, it is clear that the negative effect is likely to be much greater if it does not become apparent in the coming days that the spread of the virus has been taken away,” he added. 

Reflecting such fears, a sub-index measuring investor expectations in the euro zone fell to 6.5 from 9.8 in January.

While morale deteriorated in Asia and the euro zone, the picture was different in the US, which is showing resilience, the survey showed. 

The index for the world’s biggest economy rose to 20.3 from 15.9 in January, reaching its highest level since November 2018. 

Sentix surveyed 1,086 investors between February 6 and 8.

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Euro zone economy remains weak but green shoots emerging

Euro zone business activity remained lacklustre at the start of the year, a survey showed today but there were some glimmers of hope for policymakers. 

The survey comes a day after the European Central Bank said the manufacturing sector remained a drag on the euro zone economy. 

ECB rate-setters did not make any policy change yesterday, standing by their pledge to keep buying bonds and, if needed, cut interest rates until price growth in the euro zone heads back to their goal. 

But the slowdown in euro zone economic activity has probably bottomed out, according to a Reuters poll last week, which showed while the outlook for growth and inflation remained lukewarm the chances of a recession have faded. 

That outlook was somewhat supported by IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, which held at 50.9 in January.

But it missed the median prediction in a Reuters poll for 51.2 – anything above 50 indicates growth. 

After today’s PMI reading, the euro continued to languish near a seven-week low after the ECB’s more dovish tone at Thursday’s meeting than some had expected. 

An earlier PMI from Germany, Europe’s largest economy, showed the private sector gained momentum as growth in services activity picked up and the pullback in manufacturing eased. 

French activity expanded at a weaker pace as nationwide strikes weighed and IHS Markit cautioned growth outside of Germany and France slowed to a six-and-a-half year low. 

The UK’s performance bettered the euro zone’s for the first time since December 2018, a separate PMI showed, the strongest evidence yet of a post-election boost to the economy that could deter the Bank of England from cutting interest rates next week. 

The euro zone’s headline index was bogged down by a still struggling factory industry. 

The manufacturing PMI marked the 12th month below the break-even mark, registering 47.8 – albeit an improvement on December’s 46.3 and well above the Reuters poll’s 46.8. 

An index measuring output, which feeds into the composite PMI, rose to 47.5 from 46.1, its highest since August. 

While most forward-looking indicators in the manufacturing PMI remained in negative territory, they were moving in the right direction, today’s survey showed. 

The new orders, employment, backlogs of work and quantity of purchases indexes were all still sub-50 but did rise. 

However, the PMI for the bloc’s dominant services industry weakened to 52.2 from 52.8, confounding expectations for no change. 

And possibly of concern to policymakers, demand weakened suggesting there will not be a significant turnaround anytime soon. The services new business index fell to 51.5 from 52.1. 

But optimism about the year ahead bounced. The composite future output index climbed to 61.2 from 59.4, its highest reading since September 2018. 

Meanwhile, euro zone consumer confidence remained unchanged in January from December, official flash figures released yesterday showed. 

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Euro zone business activity close to stagnation despite services bounce – PMI

Euro zone business activity remained close to stagnation at the end of last year, a survey showed today, as an upturn in services activity only partially offset a continued decline in the bloc’s manufacturing industry. 

IHS Markit’s final euro zone composite Purchasing Managers’ Index (PMI), seen as a good indicator of economic health, nudged up to 50.9 in December from November’s 50.6. 

That beat a preliminary estimate which suggested no change from the previous month but remained close to the 50 mark separating growth from contraction. 

“Another month of subdued business activity in December rounded off the euro zone’s worst quarter since 2013.

“The PMI data suggest the euro area will struggle to have grown by more than 0.1% in the closing three months of 2019,” said Chris Williamson, chief business economist at IHS Markit.

That is worse than the 0.2% growth predicted in a December Reuters poll. 

A PMI for the bloc’s dominant services industry bounced to 52.8 from November’s 51.9, above a preliminary reading of 52.4. 

But a manufacturing PMI out last week showed factory activity contracted for an 11th month in a row in December. 

The upturn in services meant firms were at their most optimistic about the year ahead since May. A composite future output PMI jumped to 59.4 from 57.9. 

Indicating services activity may remain resilient, firms in the sector were unable to match demand last month for the first time since July. The backlogs of work index climbed to 51 from 49.7.

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Euro zone growth curbed by trade, retail sales slowdown

The euro zone economy grew at a modest pace in the third quarter with a negative impact from trade, while retail sales fell at their sharpest rate this year in October, data showed today. 

Gross domestic product (GDP) in the euro zone was up 0.2% in the three months from July to September.

This was the same figure as the flash estimate released in October and unchanged from the second quarter. 

Retail sales in the euro zone in October fell by 0.6%, double the amount expected in a Reuters poll, and were up a modest 1.4% year-on-year. The monthly decline was the steepest fall of 2019. 

The data confirmed a sombre outlook for the single currency bloc, which is facing threats and uncertainty over Brexit and rising global trade conflicts. 

Britain had been set to exit the European Union at the end of October, a deadline since pushed back until the end of January. 

In trade, the US outlined the first phase of a deal to end its conflict war with China in October, but the two are still arguing about the details. 

Year-on-year, euro zone expansion was 1.2%, also the same figure as in the second quarter of the year. 

The bloc’s largest and third largest economies, Germany and Italy, grew by just 0.1% during the quarter, while in France, the second largest economy, growth was 0.3%. 

Household spending was the strongest overall contributor, boosting euro zone growth by 0.3% percentage points, followed by government spending and capital investment at 0.1 points.

However, the contributions of trade and of inventory changes were negative, in the case of trade for a second consecutive quarter. 

In the October retail sales figures, non-food sales declined, particularly online and mail order sales, although these tend to pick up in November and December ahead of the Christmas period. 

Eurostat also said that the growth of employment in the euro zone slowed in the third quarter to 0.1% from 0.2% in the second quarter. 

Year-on-year the figure was also softer at 0.9% from 1.2% previously.

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Euro zone growth curbed by trade, retail sales slowdown

The euro zone economy grew at a modest pace in the third quarter with a negative impact from trade, while retail sales fell at their sharpest rate this year in October, data showed today. 

Gross domestic product (GDP) in the euro zone was up 0.2% in the three months from July to September.

This was the same figure as the flash estimate released in October and unchanged from the second quarter. 

Retail sales in the euro zone in October fell by 0.6%, double the amount expected in a Reuters poll, and were up a modest 1.4% year-on-year. The monthly decline was the steepest fall of 2019. 

The data confirmed a sombre outlook for the single currency bloc, which is facing threats and uncertainty over Brexit and rising global trade conflicts. 

Britain had been set to exit the European Union at the end of October, a deadline since pushed back until the end of January. 

In trade, the US outlined the first phase of a deal to end its conflict war with China in October, but the two are still arguing about the details. 

Year-on-year, euro zone expansion was 1.2%, also the same figure as in the second quarter of the year. 

The bloc’s largest and third largest economies, Germany and Italy, grew by just 0.1% during the quarter, while in France, the second largest economy, growth was 0.3%. 

Household spending was the strongest overall contributor, boosting euro zone growth by 0.3% percentage points, followed by government spending and capital investment at 0.1 points.

However, the contributions of trade and of inventory changes were negative, in the case of trade for a second consecutive quarter. 

In the October retail sales figures, non-food sales declined, particularly online and mail order sales, although these tend to pick up in November and December ahead of the Christmas period. 

Eurostat also said that the growth of employment in the euro zone slowed in the third quarter to 0.1% from 0.2% in the second quarter. 

Year-on-year the figure was also softer at 0.9% from 1.2% previously.

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Euro zone business growth near-stagnant, but some hopeful signs evident – PMI

Euro zone business activity stayed near stall speed last month, with manufacturing seemingly continuing to act as a drag on the bloc’s dominant services industry as well as the economy as a whole. 

Despite some optimistic signs in today’s survey, that picture is likely to disappoint policymakers at the European Central Bank.

In September, the ECB relaunched a €2.6 trillion asset purchase programme designed to stimulate growth and inflation. 

IHS Markit’s final euro zone composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, held steady last month at October’s 50.6. 

That beat a preliminary estimate of 50.3 but remains uncomfortably close to the 50 mark separating growth from contraction. 

The headline figure “still indicates a near-stagnant economy,” said Chris Williamson, chief business economist at IHS Markit. 

The data pointed to fourth quarter GDP growth of 0.1%, with manufacturing continuing to act as a major drag. 

“Worryingly, the service sector is also on course for its weakest quarterly expansion for five years, hinting strongly that the slowdown continues to spread,” he said. 

A Reuters poll last month had predicted growth of 0.2% this quarter. 

Offering glimmers of hope, an index measuring demand climbed to the breakeven mark having spent two months below it, firms increased the pace of hiring and optimism was at a four-month high.

The new business index was 50 compared to October’s 49.6.

“New orders have not shown any growth since August, underscoring the recent weakness of demand, with sharply declining orders for manufactured goods accompanied by substantially weaker gains of new business into the service sector,” Chris Williamson said. 

Overall services industry activity stuttered. Its PMI dipped to 51.9 from 52.2, although edging above a 51.5 flash reading. 

Still, reflecting some level of increased optimism, firms increased headcount at a faster rate. The employment index nudged up to 53.2 from 53. 

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Euro zone economy continues steady growth in third quarter

The euro zone economy continued to grow at a modest pace in the third quarter as expected, data from the EU statistics office showed today, as Germany narrowly escaped a technical recession and other big economies expanded. 

Eurostat said gross domestic product in the 19 countries sharing the euro increased 0.2% quarter-on-quarter in the third quarter for a 1.2% year-on-year gain. 

The quarterly expansion was in line with a Eurostat preliminary flash estimate earlier this month and market expectations, although the previous year-on-year figure was 1.1%. 

Germany, the euro zone’s biggest economy, grew 0.1% in the third quarter after a -0.2% contraction in the previous three months, so avoiding a technical recession. 

France, the second biggest economy grew by 0.3% in the third quarter against the previous three months and the third biggest Italy expanded 0.1%. 

Spain and the Netherlands, the fourth and fifth biggest economies of the bloc, each grew by 0.4%.

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