Stronger Economic Dynamics in the Euro Area in August

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. Lire la suite

GDP Dynamics in the Euro Area

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. Lire la suite

German Industrial Orders and Italian GDP in 3 charts

Germany: Industrial Orders in June
Two charts on German industrial orders allow a more optimistic view on the current economic outlook for developed countries.
The first chart below shows the geographical sources of these orders. The total index in purple  is mildly up trending. The decomposition shows that domestic and Euro orders are not too strong and that the main source of orders’ growth comes from outside the Euro Area. The red line has a strong momentum.
Nevertheless in June we see an impressive jump in the Euro Area. Lire la suite

Italy – The aftermath of the elections? Impact on the euro zone?

Why does the outcome of the Italian elections reshuffle the cards?

First because it comes as a surprise. A relative victory of the centre-left (Pier Luigi Bersani’s Democratic Party) would have meant a possible agreement with Mario Monti, resulting in a sufficient majority to govern the country and carry on with Mr Monti’s work. This was the scenario we all wanted to believe in.
This scenario did not materialise, however, given the return of Berlusconi, the emergence of Beppe Grillo’s movement and the disappointing results of Monti’s centrist coalition. There will be no possible continuity.   Lire la suite