Friday , August 12 2022

Analysts forecast "troubled times" for the eurozone


The corresponding barometer of the Munich Institute declined dramatically from 19.6 to 6.6 points, according to a statement Monday, the lowest level since mid-2016. Experts reviewed their assessment of the present situation future expectations.

Since 1989, the Ifo Institute has been questioning experts from various countries about the evolution of the economy, the results are based on the views expressed by 370 experts. If President Clemens Fuest says he expects "troubled times" for the eurozone economy.

In Italy and Spain, the situation and prospects have worsened further. The outlook for Italy comes amid budget problems, while experts fear that the cost of debt will rise significantly. As for Spain, it will be the first potential candidate to spread the broadcast. Expectations have become more pessimistic than those of the previous quarter.

In Germany and France, expectations remain virtually unchanged, but the current situation is appreciated sharply. On the other hand, the situation of the Dutch economy seems to have improved.

Specialized pessimism is in line with the fact that Ifo, in the context of the global trade war, has redefined export forecasts for the eurozone. At the same time, experts expect the next six months to rise in short and long-term interest rates and the dollar will continue to appreciate. The forecast for inflation rate this year is slightly rising from 1.7 to 1.8%.

The most affected by shrinking exports is Germany. In fact, the economy's performance declined in the summer amid falling production in the automotive industry. In addition, economic issues in major emerging markets, where automakers sell their production, have contributed to shrinking exports.

Brexit's unresolved issues and the financial strife within the EU leave little room for optimism. Deutsche Bank also cut Germany's economic growth forecast in 2019 from 1.7% to just 1.3%.

Also, for the first time since the end of 2014, companies have reduced their new orders.

Composite PMIs in the euro area, which measure industry and service activity, fell 53.1 points in October from 54.1 points in the previous month, according to London-based Markit estimates . It is the lowest level since September 2016, but it is below the estimates of analysts, which expect the index to fall to 52.7 points.

A PMI of more than 50 points indicates an expansion of the economy and below 50 points the indicator reflects the contraction of the economy.

"Economic progress seems quite stable," says James Nixon of Oxford Economics. In turn, Jack Allen of Capital Economics says October's economic activity figures in the eurozone show that the major economies in the region will move slightly in the fourth quarter of 2018 in the past three months.

In the third quarter, the euro area economy recorded an annual increase of 1.7%, a significant slowdown over the previous quarters, and the ECB's analysis suggests that a further downturn will bring the euro area economy below the potential inflationary pressures could be reduced.

Another worrying message is the rise in industrial producer prices in the euro area, in line with expectations in September, mainly due to higher energy prices, according to Eurostat's Tuesday data.

In September 2018, industrial producer prices in the euro area increased by 0.5% compared to August and by 4.5% compared to September. Analysts surveyed by Reuters relied on an increase of 0.4% in the previous month and at an annual growth rate of 4.2%. Eurostat also revised the data for August 2018 when industrial producer prices in the euro area recorded a 0.4% forecast compared to the previous month and 4.3% on an annual basis, compared to the initial estimates at an increase of 0.3% and 4.2% respectively.

The strong rise in industrial producer prices in September was mainly due to higher energy prices, 1.6% over the previous month and 12.7% on an annual basis. Excluding energy price variables, industrial producer prices in the euro area increased by 0.1% in September compared with the previous month and by 1.5% on an annual basis.

In the case of the European Union, industrial production prices rose by 0.6% in September compared with the previous month and by 4.9% in comparison with last September. For Romania, industrial production prices rose by 0.5% in September compared to the previous month, after a 1% increase in August and by 6.1% compared to last September, after one against five , 9% in August.

Industrial output prices signal the emergence of inflationary pressures, because if they are not absorbed by traders and intermediaries, increases in producer prices tend to be passed on to consumers, fueling the inflation that the European Central Bank wants to keep under the 2% environment.

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