Corporate surveys in November show that the pace of growth is still accelerating in the Euro Area. This can be seen at the global level but also in every sector, notably in the manufacturing sector where the stronger momentum is consistent with a higher international trade dynamics. Surveys also show that employment is increasing rapidly and that nominal pressures remain limited.
During the first half of 2017, the employment level came back at its pre-crisis peak level. This was already the case for the first quarter but it has been confirmed for the three months to June.
This robust profile in employment reflects a catch up when growth is more robust and with less uncertainty. On the graph we see that the employment profile is smoother than the GDP profile and is clearly in a catch up period.
Since the beginning of the recovery at the beginning of 2013, the Euro Area has added 6.6 million jobs. Continue reading
Synthetic indices on economic activity stabilized in August according to the Markit Survey that was out this morning. These figures are consistent with a 0.5/0.6% GDP growth for the third quarter (non annualized figures).
The employment momentum is still robust but doesn’t accelerate anymore. But the business cycle is still virtuous with a strong momentum in the manufacturing sector. The survey price index stabilized in August. The ECB can maintain its accommodative bias on its monetary policy. The more expansive euro has not yet influenced companies’ behavior.
The notion of temporary exit from the Eurozone is a nonsense. It is just a way for Germany to push Greece out definitely.
Out of the Euro Area and willing to come back implies that a country has to dramatically reduce the imbalances that led to its temporary exit in a environment which will not be the one of the common currency. With its new currency its interest rates would be much higher.
Efforts to be made to satisfy Eurozone criteria would be too important. The temptation would then to make efforts to take advantage of the devaluation of the currency in order to reshape the economy.
In other words a temporary exit is a polite manner for Germany to “fire” Greece definitely. But would Greece be an isolate case or the first of a long list?