Tag Archives: euro area

Financial stress is threatening the fragile euro area recovery, especially the credit cycle. More negative rates are likely to be part of the ECB’s response We expect the ECB to cut the deposit rate to -0.50% by June, probably in two steps (by 10bp in March and by another 10bp in June), as part of its response to weaker inflation prospects and tighter financial conditions. That said, the adverse consequences of negative rates are becoming increasingly visible as foreign central banks are...

With downside risks to the euro area outlook intensifying in recent weeks, we expect the ECB to respond by easing monetary conditions further. We leave our 1.8% growth expectation for 2016, largely based on improving prospects for domestic demand. Although we have left our forecasts for euro area GDP unchanged – 1.8% growth expected in 2016, well above trend – downside risks have intensified in recent weeks. There are both good and bad reasons to worry about the recovery but, in short,...

Private consumption drives 2015 French and Spanish GDP growth and the trend is likely to continue in 2016. Spain and France are the first countries among the euro area’s largest economies to publish GDP figures. According to preliminary estimates, Spanish and French real GDP expanded by 0.8% and 0.2% q-o-q respectively in Q4, both in line with consensus expectations. Over the year, GDP rose by 3.2% and 1.1% respectively in Spain and in France. The relatively good performance of both...

Despite a drop in January, the composite PMI remains resilient in terms of real activity. We continue to expect the pace of euro area growth to speed up from 1.5% in 2015 to 1.8% in 2016. Euro area business surveys (PMIs and IFO) disappointed in January, partly as a reflection of global uncertainty related to EM growth and market volatility so far this year. PMIs survey: easing, but still at a high level According to Markit’s preliminary estimates, the euro area composite PMI eased from...