Since mid-May emerging countries’ situation has changed dramatically. Large capital outflows and currency depreciation have weakened a lot of them. In the second half of August the focus was on India, Brazil, Turkey or Indonesia. These countries but also many others have experienced a slowdown in growth for several months now and capital outflows recently. It is the combination of these two factors that weakens them.
This situation leads to an impossible trade-off for economic policy. Continue reading
The IFO index for the month of August stood at 107.5. It is its highest level since April 2012 (in February 2013 the index was at 107.4).
We see in the first chart that this rise of the German index is also found in the ZEW and PMI / Markit survey. The first two are well above their long-term average (0 on the chart), while the index of the PMI survey is just about it.
In other words, the dynamics of German business is robust. Continue reading
The Netherlands Bureau for Economic Policy Analysis (CBP) has just released the world industrial production index and the world trade data for June. This gives a good perception of the economic momentum during the second quarter.
I’ve already used this data (see here) and this is an update and a way to understand the current economic situation. Continue reading
After a constant improvement since March 2013 the French index of the PMI/Markit survey slowdowns in August. The index is still below the threshold of 50 at 48.5 after 48.9 in July. The average (48.7) is well above the Q2 average (46.1) and the Q1 average (43.8). The process is still improving but it does not show a faster momentum. Continue reading
The five charts below give a clear idea of the current economic situation in the Euro Area. In August, signals from the PMI/Markit survey are positive, leading to a more robust momentum than what was seen last spring. We can expect that the industrial production will accelerate in the coming months.
We are may be at the turning point of the business cycle with some good news concerning the futures (new orders) but also with lagging indicators that can be perceived as a drag to the economic activity. This is clearly the case for employment which is still decreasing in the survey. Continue reading
The two charts below give a synthetic view of what’s going on in the Chinese economy at summer end. We know that the growth momentum is slower than it used to be. Currently the growth rate is below 8% and the question is to know if it will slow again or not.
This survey gives some short-term answers. Continue reading
Usually a nice chart gives a lot of information. This succession of 9 charts is targeted to give you a very simple but persuasive view on the economic dynamics in the Euro Area.
GDP growth numbers have been stronger than expected for a bunch of countries and for the Euro Area as a whole.
This simultaneity means that the reduction in uncertainty is an important source, an important contribution for this improvement. There are a lot of new institutions that were put in place during the last year. They have dramatically reduced the risk of a Euro burst. So the economic horizon for households and for companies is no more limited by this systemic uncertainty that was perceived a year ago. Nevertheless, this does not mean that we are at the eve of a strong and durable recovery. Companies’ investment is still too low to witness a long-lasting recovery. That’s the point to look at in the next couple of quarters. During this period governments have to adopt a more business friendly attitude in order to let the economy improves by itself. It’s not time to change again the global framework if the target is to reduce uncertainty to favor investment and then employment. We don’t need more austerity that can be interpreted as negative shock on the economy. Targeted budget balances have to be conditioned by growth, not the contrary.
The very positive point for the Euro Area outlook can be seen in companies’ surveys. Continue reading