More Evidence of Softening Euroland Economy
February 19, 2019
Aside from rises of 0.5% against the kiwi, 0.4% versus the Australian dollar and 0.3% relative to the euro, there’s been little net movement in the dollar overnight.
Share prices are lower in Asia and Europe. Equities dropped 0.5% in Hong Kong, 0.3% in New Zealand, and 0.2% in Singapore, South Korea, and India. Stocks in Europe so are have lost 0.9% in Italy, 6% in Spain and the U.K., 0.5% in France, 0.4% in Switzerland and 0.2% in Germany.
Ten-year sovereign debt yields in the U.K., Japan and Germany are a basis point lower.
Commodity prices have risen by 0.8% in the case of WTI crude oil and 0.7% in gold.
According to the February survey of financial market expects conducted by the German ZEW Institute, perceived current conditions in that economy deteriorated markedly this month despite a modest uptick in expectations. The index of current conditions printed at +15.0, down from 27.6 in January, 45.3 in December, 58.2 in November, 70.1 in October, and 76.0 in September. Moreover, the latest value for analyst expectations, minus 13.4, remains far beneath its long-term average of +22.4. In describing the results, ZEW officials concluded that a rapid recovery from the recent slowing trend of Germany’s economy is not in the cards. No improvement is likely to emerge during the next half year.
ZEW also reported that current conditions in the whole euro area economy fell 8.3 index points to minus 3.0 in February and was 39.2 points weaker than its level last July. Expectations in Euroland printed at -16.6 in the latest month. Separately, euro area construction output and current account data were released today, and these results were weak, too.
- Construction output slipped 0.4% in December and posted a 12-month increase of only 0.7%, the smallest rise since July and down from a 2.6% on-year advance between the first half of 2017 and the first half of last year.
- Euroland’s seasonally adjusted current account surplus fell EUR 6.0 billion to EUR 16.2 billion in December. That’s about 25% smaller than analysts were forecasting. By comparison, the monthly average current account surplus in 2018 was EUR 28.5 billion, equal to 3.0% of GDP.
Italy’s current account surplus narrowed to a 3-month low in December of EUR 4.211 billion.
Italian industrial orders sank another 1.8% in December, marking the fourth consecutive month-on-month contraction. From a year earlier, orders were down 5.3% in December versus a 0.8% on-year rise back in August.
Portuguese producer price inflation subsided sharply to 1.2% in January from 2.7% in December and 4.8% as recently as October, while Finnish consumer prices last month posted a 0.4% monthly drop and only a 1.1% 12-month rate of increase.
Elsewhere in Europe came news of a smaller 14.2K rise in British jobless insurance claims during January, a continuing 44-year low of 4.0% in the ILO-basis U.K. unemployment rate last quarter, and a 3.4% on-year rise in average wage earnings during the October-December period.
Swedish CPI inflation eased to an 8-month low of 1.9% in January.
Switzerland’s seasonally adjusted trade surplus of CHF 1.388 billion last month was 21% smaller than in December and 47% narrower than the 2018 average.
Published minutes of this month’s Reserve Bank of Australia review of monetary policy express heightened concern about the outlook for housing and consumption. The directional risk of the next official cash rate change is now considered evenly balanced, although Board members do not see a compelling case to change policy soon.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland current account and construction output, German ZEW Institute, RBA minutes