Real Interest Rates and Growth – Euro Area 2009 – 2013

An interesting chart has been published on Bruegel’s blog (Bruegel is a Think Tank from Belgium see http://www.bruegel.org ). On one side of this chart there are real interest rates for Euro Area countries from 2009 to 2013 and on the other average growth numbers for the same countries on the same period. Spontaneously there is no causality but we see that on the period high real interest rates are associated with low growth performances. That’s a reason for Mario Draghi try to reduce fragmentation on financial market. Continue reading

Janet Yellen at the Congress on July the 15th

Due to a stronger business cycle momentum in the second quarter, Janet Yellen’s answers on monetary policy were expected as important. It was her semi-annual testimony at the Congress (Senate) on July the 15. (see here her report)
An article in the Wall Street Journal yesterday mentioned that some FOMC members were expecting a more rapid increase of interest rate than what was said in the last minutes of the Fed’s meeting. (see here). What was then her position? Continue reading

France, Europe…industrial activity dropped in May. No inflation in France

The economic momentum is still weak in the Euro Area. Industrial production data for May dropped in Euro Area largest countries, Germany, France, Italy and Spain, but also in the United Kingdom. For the first three countries, carry over growth, at the end of May, for the second quarter is negative.
Companies’ surveys for June in the Euro Area have also shown that the current dynamics was weak except in Spain. This means that there is a risk on GDP growth numbers for the second quarter. We will wait on the publication of the Euro Area data (July the 14th) on industrial production to possibly change my forecast for the second quarter. In the UK the NIESR has published its forecast for the second quarter at 0.9% (non annualized). For them, the negative number for May was temporary. In the UK, Markit (see here) and CBI surveys are high. The momentum is different from the rest of Europe.

In France, the drop of the industrial production index was deep in May. Without a strong rebound in June we can expect a zero growth number for the second quarter. The figure could even be negative. (The probability of the rebound is low as surveys in the manufacturing sector in June were all negative) Continue reading