Early signs of growth in Eurozone?

Press conference by Olli Rehn, Vice-President of the EC, on the economic forecasts for 2013-2014, (EC Audiovisual Services).

Press conference by Olli Rehn, Vice-President of the EC, on the economic forecasts for 2013-2014, (EC Audiovisual Services).

All business and consumer indicators for the euro area showed betterment in May according to the Commission’s Directorate General for Economic and Financial Affairs (DG ECFIN), which conducts those regular and harmonised surveys. Business climate indicator (BCI), consumer confidence and economic sentiment indicator (ESI) all improved during this month of May. It’s the first time since many months that all three business and consumer indicators were together on the rise. Not to forget that Eurozone’s real economy is for 18 months in a row in a recession, with its GDP on the fall. But let’s turn to details.

Those business and consumer indicators are based on regular surveys for different sectors of the economies in the European Union (EU) and in the applicant countries. They are addressed by DG ECFIN to representatives of the industry (manufacturing), the services, retail trade and construction sectors, as well as to consumers. Given that the results represent people’s sentiment about reality and of course the future, it is understandable that their answers are influenced by the wider developments. Consequently the results of those surveys may be interpreted as early indications for the things to come.

Not to forget that currently there is a growing perception in the wider public, that the financial crisis is behind us, despite the fact that the real economy doesn’t seem yet to have produced any positive signs. In such a context the people who answer the DG ECFIN questions, tend to see betterment even if today’s reality is not rosy. In any case the structure of those surveys is supposed to address effectively the possible errors in peoples’ perception. To this effect questions are designed to focus in quantifiable variables avoiding personal value judgements.

Economic sentiment

According to the findings of the survey in May the Economic Sentiment Indicator picked up again. The indicator’s recovery started in autumn last year but was interrupted by flat developments in March and deteriorations in April. May brought new increases of 0.8 points in the euro area (to 89.4) and 1.1 points in the EU (to 90.8). In the euro area, the recovery was driven by brightening sentiment in all business sectors, except for construction and, to a lesser extent, by more optimistic consumers. Four of the five largest euro area economies saw sentiment improving, namely Italy (+1.5), the Netherlands (+1.2), France (+0.9) and Germany (+0.6).

In many respects this development may seem awkward, because the real economy during the first quarter of the year produced negative developments in production and incomes. However during the past few weeks there was a growing belief that the austerity policies are coming to an end. The European Sting produced an article yesterday entitled “Mood changes in Europe in favour of growth and jobs”. This idea about a change of mood in the European Union from austerity into something more attractive is based on the European Commission’s announcement last Thursday, about giving more time to a number of countries, including France and Spain, to correct their fiscal deficits. By the same token Italy was allowed to exit the excessive deficit procedure. All those developments mean that government spending will cease to decrease and may even increase over the next months. Now let’s turn to consumers.

Consumer confidence

All 8 o’clock news during the past few months were reporting that austerity must come to an end. This has probably changed to the better the mood of the wider public. Incidentally the survey showed that consumer confidence increased slightly (+0.4) in May for the sixth consecutive month. While consumers’ expectations for the future financial situation of their households brightened and unemployment expectations declined, consumers were slightly grimmer about the future general economic situation. Their savings expectations remained unchanged. Today’s increase of consumer confidence may be transformed into tomorrow’s increased retail sales. This surely may be an early indication for the coming real economy growth.

Business climate indicator

That is probably why the Business Climate Indicator (BCI) in May for the euro area increased by 0.28 points to -0.76. While production expectations deteriorated slightly, DG ECFIN reports that “managers’ appraisal of the stocks of finished products, order books (overall and export) and past production improved. The latter component saw a particularly sharp increase”. Fortunately exports are still the strong asset of the EU economy. In the long run though sustainable growth must be fuelled mainly by internal demand for consumption and investment.

In any case the improvement of business and consumer confidence indicators is a reliable sign that real economy growth may not be far away. The question is if this return to the growth path will be strong enough to be felt in the labour market and start reducing unemployment.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

EU and China to do more in common if the global scene gets worse

Companies can help build a more inclusive world. Here’s how

EU-Singapore free trade deal gets green light in Trade Committee

UN calls for support to implement Central Africa’s newly minted peace agreement

Why tourism policy needs to use more imagination

More women and girls needed in the sciences to solve world’s biggest challenges

Crime and drugs in West and Central Africa: Security Council highlights ‘new alarming trends’

The Oslo model: how to prepare your city for the electric-vehicle surge

Managers’ pay under fire

South Asia can become an innovation hub. Here’s how

‘I don’t like to give up’: veteran UN envoy reveals how two decades of quiet diplomacy gave birth to North Macedonia

How populist and xenophobic movements in the EU tear apart European businesses and startups

Investment, not debt, can kick-start an entrepreneurial Europe

Human Rights: breaches in Cambodia, Uganda and Myanmar

‘No-deal’ Brexit: European Commission takes stock of preparations ahead of the June European Council (Article 50)

Draghi: Germany has to spend if Eurozone is to exit recession

How has tech been used for good in civil society? We asked the experts

It’s EU vs. Google for real: the time is now, the case is open

Yemen: Major UN aid boost for ‘up to 14 million’ as country risks becoming a land of ‘living ghosts’

COP25: MEPs push for CO2 neutrality by 2050

Climate change: Direct and indirect impacts on health

There are more than 1 billion guns in the world and this is who owns them

Erasmus+ will finance existing UK-EU mobility in the event of no-deal Brexit

A Sting Exclusive: “Digital iron curtain makes no sense in 5G era”, by China’s Ambassador to EU Mr. Zhang Ming

3 steps to making multistakeholder partnerships a powerful force

MEPs urge the EU to lead the way to net-zero emissions by 2050

UN food relief agency airlifts aid to DR Congo province hit by Ebola outbreak

35th ACP-EU Assembly: migration and demographics will dominate the debate

COP21 Paris agreement: a non legally-binding climate pact won’t stop effectively global warming while EU’s Cañete throws hardest part to next Commission

We are on the edge of a new ‘cyber’ space age. This is how we make it a success

Overseas investment falling, developing countries largely unscathed: UN trade agency

At least 2.5 million migrants were smuggled in 2016, first UN global study shows

UN chief calls for ‘far greater support’ for Cyclone Idai response

EU’s Mogherini visits Turkey “to step up engagement” and highlight interests

World’s Press Calls on the United Kingdom to Address Press Freedom Concerns

New phenomena in the EU labour market

Is the West gradually losing Africa?

Global Citizen – Volunteer Internships

The West – the EU and the US – is writing off Turkey’s Erdogan

How to harness data to tackle rare diseases

Ship Recycling is the Commission’s Titanic

How cities can become more resilient to climate change

Historic first, as Tolstoy’s War and Peace lands in Geneva, to mark international centenary

EU’s tougher privacy rules: WhatsApp and Facebook set to be soon aligned with telcos

Polluted lungs: health in the center of environment discussion

OECD tells Eurozone to prepare its banks for a tsunami coming from developing countries

EU-Russia summit in the shadows of Kiev’s fumes

Promoting gender equality a ‘crucial contribution’ in effort to restore, protect our planet’s oceans

GSMA Mobile 360 Series –Digital Societies, in association with The European Sting

The three biggest challenges for India’s future

This start-up is making a palm oil alternative from used coffee grounds

Progress in medical research: leading or lagging behind?

Risks rising in corporate debt market

DR Congo elections: ‘Excessive use of force’ in campaign must be avoided, says Bachelet

European Commission calls on national political parties to join efforts to ensure free and fair elections in Europe

More than nine in ten children exposed to deadly air pollution

MEPs call for decisive action to fight inequalities in the EU

‘Refrain from violence’ UN chief urges, as presidential election result is announced in DR Congo

Here’s why infrastructure will make or break our response to climate change

This is what great leadership looks like in the digital age

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s