Wednesday , January 20 2021

Analysts predict "difficult times" for the eurozone



The corresponding barometer of the Munich Institute fell sharply from 19.6 to 6.6 points in the shortest period since mid-2016, experts from the press reported. future expectations.

Since 1989, Ifo has been releasing experts from different countries on the development of the economy, and the results are based on the views expressed by 370 experts. If President Clemens Fuest says he expects "turbulent moments" for the economy of the eurozone.

In Italy and Spain, the situation and prospects have worsened the most. Forecasts for Italy are coming from budget problems, and experts fear that debt costs will increase significantly. As far as Spain is concerned, it would be the first potential candidate for the spread of the infection. Expectations have become more pessimistic than those in the previous quarter.

In Germany and France, expectations remain almost unchanged, but the current situation is highly appreciated. On the other hand, the position of the Dutch economy appears to have improved.

Professional pessimism coincides with the fact that the Ifo institute, in the context of the World Trade War, redefined its export forecast for the euro area. At the same time, experts expect that the short-term and long-term interest rates will increase in the next six months and will continue to appreciate the US dollar. The forecast of this year's inflation rate is slightly increasing from 1.7 to 1.8 percent.

The most affected export decline is Germany. Indeed, the economy fell in the summer months, with a drop in production in the automotive industry. In addition, economic issues in major emerging markets, where car manufacturers sell their production, have contributed to reducing exports.

Brexit's unsolved issues and the budgetary dispute within the EU leave little room for optimism. Deutsche Bank also downgraded Germany's economic growth forecast in 2019 from 1.7% to only 1.3%.

Also, for the first time since the end of 2014, companies have seen a decline in new orders.

In October, Composite Purchasing Managers (PMIs) in the euro area, measuring industrial and service industries, fell to 53.1 points from 54.1 points, according to a London trader Markit. This is the lowest level since September 2016, but it is under the estimates of analysts who expect the index to fall to 52.7 points.

The PMI indicator with more than 50 points shows the expansion of the economy and below 50 points, the indicator reflects a decline in the economy.

"Economic progress is pretty good," says James Nixon of Oxford Economics. In his opinion, Jack Allen, Capital Economics, says: "October data on economic activity in the euro area show that in the last quarter of 2018 the major economies of the region will move slightly over the last three months."

In the third quarter, the euro area economy grew by 1.7% yoy, which significantly slowed down in the previous quarters, and the ECB's analysis suggests that a further economic slowdown would increase economic growth in the euro area under the potential growth of which inflationary pressures could be reduced .

Another worrying signal is the rise in producer prices of manufactured goods in the euro area, which is above expectations in September, mainly due to higher energy prices, reported in Eurostat.

In September 2018, industrial producer prices in the euro area increased by 0.5% compared to August and by 4.5% compared to September last year. Analysts surveyed by Reuters have increased by 0.4% compared to the previous month and an annual growth rate of 4.2%. Eurostat also revised data for August 2018 when the prices of industrial producers in the euro area compared to the original estimates compared to the previous month amounted to an advance of 0,4% and 4,3% to 0,3% and 4,2% respectively.

High growth in industrial product prices in September was mainly due to the advances in energy prices, 1.6% compared to the previous month and 12.7% compared to the previous year. Excluding volatile energy prices, euro area industrial products in September increased by 0.1% compared to the previous month, while year-on-year prices rose by 1.5%.

In the case of the European Union, the prices of manufactured goods in September increased by 0.6% compared to the previous month, while compared to September last year they increased by 4.9%. In Romania, industrial prices in September increased by 0.5% compared to the previous month, after increasing by 1% in August and by 5.9% in August compared to September 2006 by 6.1%.

Prices of industrial products point to inflationary pressures, as if they are not absorbed by traders and brokers, the increase in producer prices is usually passed on to consumers and encourages the inflation that the European Central Bank wants under the 2% environment.


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