The February round of business surveys confirms that euro area growth is losing steam: alongside the manufacturing sector, also services are now slowing. At best, GDP will grow at the same pace as in 2015, and risks are skewed to the downside. In the meanwhile inflation is likely to fall back to -0.2% in february after weak data from Germany, France and Spain. Upside surprises in the US, ahead of the February Employment Report…<\/p>\n
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Sign up for our free newsletter to receive weekly news from BONDWorld. Click here to register for your free copy<\/strong><\/span><\/a> <\/strong><\/span><\/a><\/span><\/p>\n Intesa Sanpaolo – Research Department For professional investors and advisers only<\/strong><\/p>\n – Evidence is mounting that the scenario outlined by the ECB in December, which included euro area GDP growth of 1.7% in 2016-17, is now out of date. GDP data for the closing months of 2015 had already disappointed, setting the expansion of economic activity in the euro area at a mere 0.3% q\/q, with a one tenth drag effect on the 2016 forecast.<\/p>\n This week, monthly surveys confirmed the deterioration in sentiment seen in January. The composite PMI dropped more than expected, to 52.7 from 53.6, one point below the average for the previous six months, and at its lowest levels in over a year.<\/p>\n The EU Commission’s economic sentiment index remains at higher levels (103.8), but dropped again in February in any case. Worsening sentiment on demand conditions and on current output is mostly affecting the German industrial sector, with the manufacturing PMI on the decline by 2.1 points to 50.2, close to the threshold which separates growth from contraction.<\/p>\n French industry is still stuck at around 50, incapable of breaking free of the semi-stagnation observed over the past year. Sentiment has deteriorated in Italian manufacturing as well, although it remains on levels compatible with a modest expansion. Survey data confirm that, for the time being, activity in the services and retail sales sectors, more sensitive to the trend of domestic demand, is proving resilient, although in Germany at least the peak seems to have been reached. Furthermore, February surveys, and PMIs in particular, have signalled a drop in the hiring intentions index, to 51.8 from 52,4.<\/p>\n Therefore, the surveys signal that the recovery is losing steam compared to the end of 2015 as well, and point to euro area GDP growth of 0.3% q\/q also in the opening quarter of 2016. However, for the time being no data is available on output, retail sales, and foreign trade. The weaker than expected trend between the end of 2015 and the beginning of 2016, subtracts two tenths, all other conditions being the same, to average growth in 2016, down in our estimation to 1.5%. To match its pace in 2015, GDP growth should reaccelerate into the 0.55% q\/q area in the central months of the year. While this possibility should not be ruled out, in light of monetary policy stimulus and the drop in oil prices, downside risks prevail, given the uncertainty of the global context.<\/p>\n In addition to far from reassuring indications on the economic cycle, this week the advance estimate could point to a drop in euro area inflation -0.2% in February (data due out on Monday) following weak data from the German Laenders and out of Spain. Future contracts suggest a very gradual recovery in oil prices in the next 24 months, therefore the inflation trend will increasingly depend on the reacceleration of core inflation, which nonetheless seems unlikely in the absence of a recover in GDP growth. The ECB’s fight against lowflation is here to stay.<\/p>\n – In the United States, recent data releases brought a number of favourable surprises, confirming forecasts of a reacceleration in growth at the beginning of 2016, after the quasistagnation seen at the end of 2015. The Atlanta Fed’s GDP Now estimate sees growth in 1Q 2016 now at 2.5% q\/q ann.; the Chicago Fed’s National Activity Index returned into positive territory in January (+0.28) for the first time after five consecutive months below the zero mark. With respect to activity, the increase in capital goods orders in January, and the revision of December data, signal a likely recovery of non-residential fixed investment in 1Q.<\/p>\n As for prices, the January CPI beat expectations, showing a 0.3% m\/m (2,2% y\/y) change in the core index, which confirms the uptrend in the services sector, despite the downward pressures exerted by energy prices and the dollar. Next week, the Employment Report should confirm solid NFP growth, and an unemployment rate in line with the equilibrium rate. Although the domestic picture remains positive, the Fed’s tones remain extremely cautious, and implicitly confirm the market’s expectations for a pause in the upward path of interest rates at the 16 March FOMC meeting.<\/p>\n Source: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":" The February round of business surveys confirms that euro area growth is losing steam: alongside the manufacturing sector, also services are now slowing. At best, GDP will grow at the same pace as in 2015, and risks are skewed to the downside. In the meanwhile inflation is likely to fall back to -0.2% in february […]<\/p>\n","protected":false},"author":2,"featured_media":3723,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1912","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1912","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1912"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1912\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3723"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1912"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1912"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1912"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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