Eurozone PMI drops sharply in December

11
Eurozone PMI drops sharply in December

According to Bert Colijn, senior economist at ING, the decline in Eurozone PMI from 52.7 to 51.3 suggests the revival of GDP growth may not have happened at all.

Key Quotes
“Today, the PMI sends a message that is more along the lines of “continuing confidence with alarm bells ringing”.”

“GDP growth in the third quarter slowed to 0.2% with expectations of a bounce back straight after. Even though the PMI is still signalling output growth, the question is whether growth has even picked up at all despite one-offs affecting the third quarter reading.”

“New orders barely grew in December and export orders showed the sharpest contraction seen since the start of the indicator. The global economic environment is hindering Eurozone output, but internal factors like the French protests also played a role in the weak December reading.”

“Today’s PMI confirms an already slow growth environment and with plenty of downside risks possibly materialising before summer next year, doubts about the forward guidance are likely to increase.”

Sources: https://money.net & https://www.fxstreet.com/news/eurozone- ... 1812140948
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Re: EUR news

13
Brexit , Frexit and now 'Dexit' has been murmured

German far-right party Alternative fur Deutschland (AfD) has voted to campaign for Germany's withdrawal from the European Union if Brussels fails to meet its demands for reform.

While rank and file members insisted the so-called 'Dexit' be included in the party manifesto, party leaders approached the idea with caution, aware of the country's majority support for the EU.


"When you play with the idea of a Dexit, you have to ask yourself if this is Utopia and if we should better stay realists," party leader Alexander Gauland said in a speech on Sunday.

The party spent the first two days of the conference selecting candidates for the European elections in May.

Outside the conference hall in the Eastern city of Riesa, anti-fascist demonstrators gathered to protest the AfD's presence. The mostly peaceful rally saw isolated clashes between police and right-wing groups.

Riesa has been the site of several neo-Nazi incidents and is home to the right-wing NPD party and publishing house "Deutsche Stimme".

https://www.euronews.com/2019/01/13/ger ... et-demands
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Re: EUR news

15
Eurogroup president Mário Centeno on Brexit and EU Elections





Founded in 1998, the Eurogroup is made up of the finance representatives of 19 EU member states – all of whom have adopted the euro as their official currency. The group ensures better coordination of economic policies, but also represent the euro in international monetary forums.
As the EU celebrates the 20th anniversary of the euro and a looming Brexit, Euronews’ business editor Sasha Vakulina sat with Eurogroup president Mário Centeno.



Sasha Vakulina:
“Mr Centeno, it has been one year since you have taken the helm at the Eurogroup. What has been the most impressive to you over this year?”

Mário Centeno, Eurogroup President:
“We had two big tasks this year: to bring a deal to the December European Summit on the reform of the euro, it is a very impressive reform outside crisis time. And the end of the third programme (Bailout programme) for Greece. So August 20th is a very important day for the euro area as it is the date which put an end to the programme in the euro area. So the first meeting in September – for a long period of time without programme (bailout programme)”


SV:
“How significant was it to have Greece exit the bailout programme after so many years?”

MC:
“It is very important for everyone, but especially for the Greek people. Three programmes, 8 years, lots of reforms, very hard measures that we all expect to pay out in terms of growth, in terms of social cohesion. There is still a lot to do, but Greece is finally taking care of all its subjects and problems on their own. No more programmes – this is very important”

SV:
“As we said Greece was the very last country to officially exit the bailout programme. What is the stage now? Is it still the stage of recovery or is it the stage of dynamic growth?

MC :
“We are at the stage after a peak of growth in 2017, which was a very impressive period of growth for all countries. All countries growing at above 1,5 percent.

2018 saw a little bit of deceleration, some risks, some uncertainties picking up – this is totally normal in an economy, so we should not panic. But the good thing about the eurozone today is that we have the best indicators ever to deal with those fluctuations. The almost balanced budget for the whole of the euro area, the big saving that we generate in the euro area above 3 percent of GDP for the whole area, the very important coordination mechanisms that we have in place – these are all good news for us to deal with the economic fluctuations in the future. Again, 2018 saw some deceleration from the impressive growth of 2017 but still the investment rate – the latest figures for 2018 for the investment grade – showed the investment grade increasing and actually topping the pre-crisis level.”

SV:
“Looking forward to 2019 as an important year for the eurozone, how much of an impact will Brexit have?”

MC:
“It is a structural adjustment. It takes time for agents, economic agents: families, firms to adjust. And we must give them this time. It is an impact that may differ from country to country, Ireland is at the central stage, of course, and the Netherlands. But overall all euro area member states need to adjust, but especially the UK.”

SV:
“What about risks coming from trade tensions. How important are those for the economy?”

MC:
“If we go back 6 months those trade tensions were much more in the news. Fortunately, policymakers were able to get together. Important meetings occurred during the summer and those trade tensions are now reduced. And this is what brings my optimism. If we deal with those political issues having in mind that our action plan must be directed to our citizens – we will get the right answers to very complex questions. We must avoid at all times simple answers to very complex actions. Then some other movements that are not in the framework of our institutions occur and that's what we have to avoid.

But 2019 is also a year of a new political cycle. We are in the European Parliament. So a new body will take place also for the commission

SV:
“Do you think that basically the Eurozone countries will undergo some serious changes after the elections?”

MC:
“You know I am not very favourable about big machines, big changes. I think we need to go step by step. This is the only way to convey the process to citizens, to bring everyone on board of these reform processes. So I have to be totally honest – I don't expect big changes out of the elections. The more mature institutions are – the stronger the checks and balances and the stronger the stability consensus that we need to have around these institutions. So yes, this is a year of change, on a continuity of the processes that we have right now.”

SV:
“Do you see euro skepticism rising as a factor for the economic growth with the election in May?”

MC:
“It is quite paradoxical because euro is at the highest level in terms of the support of people for the euro[zone]. So yes, there are concerns, but those concerns do not mean that we are going to break up. Actually, as you know, many people bet against the odds of survival of the euro throughout the crisis. Political commitment was able to make ourselves stronger. Well, I don't really see that type of risks coming, but I don't see either big revolutions in terms of the way we deal with the institutions and that's the way I think we have to proceed.”

SV:
“Mário Centeno, thank you so much for this interview”

MC:
“Thank you, Sasha. Thank you for having me”



https://www.euronews.com/2019/01/17/eur ... -elections
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Italy in recession amid sluggish eurozone

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Italy in recession amid sluggish eurozone

Italy's economy tipped into recession at the end of last year, according to latest figures.

In the final three months of 2018, the economy shrank by 0.2%, following a 0.1% decline in the third quarter, the Istat statistics office said.
Italian Prime Minister Giuseppe Conte said the contraction was likely to continue into 2019.
Meanwhile, figures from the EU showed economic growth in the 19-country eurozone still languishing.

Growth in the euro area remained at 0.2% in the final quarter of 2018, the same as the previous quarter and in line with analysts' expectations.
The figures, issued by the Eurostat agency, showed that in the 28-nation EU as a whole, fourth-quarter growth was 0.3%.
Image

In contrast to Italy, some other eurozone economies expanded more than expected, with France and Spain posting growth rates of 0.3% and 0.7% quarter-on-quarter respectively.
Italy's statistics office said agriculture, forestry, fishing and industry had all contributed to the economic downturn, while a rise in net exports failed to offset those declines.

Italy's coalition government was forced to revise its expansionary 2019 budget last month after the European Commission raised concerns about the impact on the country's debt levels.
The renewed recession in Italy aggravates the problem the government has with its finances.
The ruling parties' desire to increase spending to meet election campaign commitments led to a stand-off with the European Commission which argued Italy was going to be borrowing too much. Rome pared back its plans and the dispute was resolved.
But the fact that the economy has turned out to be even weaker is bad news for the government finances.

Tax revenue will be hit and that will tend to lead to a bigger financial hole to be filled by borrowing.

Italy's problem is its accumulated debt, which is on one measure the largest in the eurozone.

It would be a huge problem for the rest of the eurozone if Italy were to suffer the kind of debt crisis that Greece and others experienced a few years ago.

That is not a near-term prospect, but Italy's persistently weak economic performance makes it very hard to banish that risk conclusively.
Italy has the biggest government debt in the EU at more than €2.3 trillion ($2.6tn; £2tn). It is also the fourth-largest government debt in the world.

The country's debt burden as a percentage of annual economic activity is second only to Greece in the EU at 132%.

Last week, European Central Bank (ECB) president Mario Draghi said eurozone economic data had been weaker than expected and the risks to growth had increased.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said that the overall eurozone figures "don't look pretty, but have been well telegraphed by the hard data and the financial market horror show in Q4".

"Indeed, it seems to us that markets will be inclined to look at these headline [figures] as good news. They indicate that things probably won't get much worse in the near term - this is a bold assumption, given poor January survey data - and that the ECB will keep rates low for a long time."
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European Commission Economic Forecast

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Winter 2019 Economic Forecast: growth moderates amid global uncertainties

The European economy is expected to grow for the seventh year in a row in 2019, with expansion forecast in every Member State. The pace of growth overall is projected to moderate compared to the high rates of recent years and the outlook is subject to large uncertainty.

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: "All EU countries are expected to continue to grow in 2019, which means more jobs and prosperity. Yet our forecast is revised downwards, in particular for the largest euro area economies. This reflects external factors, such as trade tensions and the slowdown in emerging markets, notably in China. Concerns about the sovereign-bank loop and debt sustainability are resurfacing in some euro area countries. The possibility of a disruptive Brexit creates additional uncertainty. Being aware of these mounting risks is half of the job. The other half is choosing the right mix of policies, such as facilitating investment, redoubling efforts to carry out structural reforms and pursuing prudent fiscal policies."

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “After its 2017 peak, the EU economy's deceleration is set to continue in 2019, to growth of 1.5%. This slowdown is set to be more pronounced than expected last autumn, especially in the euro area, due to global trade uncertainties and domestic factors in our largest economies. Europe's economic fundamentals remain solid and we continue to see good news particularly on the jobs front. Growth should rebound gradually in the second half of this year and in 2020.”

Economic growth

Economic activity moderated in the second half of last year as global trade growth slowed, uncertainty sapped confidence and output in some Member States was adversely affected by temporary domestic factors, such as disruptions in car production, social tensions and fiscal policy uncertainty. As a result, gross domestic product (GDP) growth in both the euro area and the EU likely slipped to 1.9% in 2018, down from 2.4% in 2017 (Autumn Forecast: 2.1% for EU28 and euro area).

Economic momentum at the start of this year was subdued, but the fundamentals remain sound. Economic growth will continue, albeit more moderately. The European economy is set to continue to benefit from improving labour market conditions, favourable financing conditions and a slightly expansionary fiscal stance. Euro area GDP is now forecast to grow by 1.3% in 2019 and 1.6% in 2020 (Autumn Forecast: 1.9% in 2019; 1.7% in 2020). The EU GDP growth forecast has also been revised down to 1.5% in 2019 and 1.7% in 2020 (Autumn Forecast: 1.9% in 2019; 1.8% in 2020).

Among the larger Member States, downward revisions for growth in 2019 were sizeable for Germany, Italy, and the Netherlands. Many Member States continue to benefit from robust domestic demand, also supported by EU funds.

Inflation

Consumer price inflation in the euro area fell towards the end of 2018 due to a sharp drop in energy prices and lower food price inflation. Core inflation, which excludes energy and unprocessed food prices, was muted throughout the year, despite faster wage growth. Overall inflation (HICP) averaged 1.7% in 2018, up from 1.5% in 2017. With oil price assumptions for this year and next year now lower than in autumn, euro area inflation is forecast to moderate to 1.4% in 2019 before picking up mildly to 1.5% in 2020. For the EU, inflation is forecast to average 1.6% this year and then pick up to 1.8% in 2020.

Uncertainties

A high level of uncertainty surrounds the economic outlook and the projections are subject to downside risks. Trade tensions, which have been weighing on sentiment for some time, have alleviated somewhat but remain a concern. China's economy may be slowing more sharply than anticipated and global financial markets and many emerging markets are vulnerable to abrupt changes in risk sentiment and growth expectations. For the EU, the “Brexit” process remains a source of uncertainty.

For the UK, a purely technical assumption for 2019

In the light of the process of withdrawal of the UK from the EU, projections for 2019 and 2020 are based on a purely technical assumption of status quo in terms of trading patterns between the EU27 and the UK. This is for forecasting purposes only and has no bearing on the process underway in the context of Article 50.

Background

This forecast is based on a set of technical assumptions concerning exchange rates, interest rates and commodity prices with a cut-off date of 25 January 2019. For all other incoming data, this forecast takes into consideration information up until 31 January.

The European Commission publishes two comprehensive forecasts (spring and autumn) and two interim forecasts (winter and summer) each year. The interim forecasts cover annual and quarterly GDP and inflation for the current and following year for all Member States and the euro area, as well as EU aggregates.

The European Commission's next comprehensive forecast will be the Spring 2019 Economic Forecast in May 2019.

Source : European Commission - Press release
http://europa.eu/rapid/press-release_IP-19-850_en.htm
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