Long term Euro Area growth has been slowing and this is best illustrated by looking at annualised growth over 5 and 10 year horizons. Could growth in the current cycle have already peaked?
Loan growth remains lacklustre and broad monetary aggregates ex M1 are declining. The most recent decline in loan growth looks to be mirroring the deceleration in economic growth experienced since Q1 2015. The ECB increased its monetary stimulus push in March in response.
Employment and wage growth continue to rise but are hardly inspiring amidst considerable unemployment across the Euro Area.
The slowdown in global trade appears to be impacting key manufacturing new orders, in particular in Germany where the IFO Business Cycle Clock for the manufacturing sector shows a downturn.
German foreign capital goods orders relative to trend:
Export growth is sliding…has it peaked?
Economic sentiment is in decline as is consumer confidence in the Euro Area: yet further indication that growth may have peaked.
Shorter term data, in particular the Flash Markit Composite PMI for the Euro Zone, shows a tepid March bounce back from weakness in the first two months of the year.
“despite the rise in March, the average PMI reading for the first quarter of 53.4 was the lowest quarterly trend for a year, signalling a slight slowing in the pace of economic growth”
Slowing growth in China, what looks to be a weak plateau in the US and a still slow recovery in Europe is raising global financial/economic stability risks. There remains considerable slack in Europe and lower energy prices appear to have helped boost consumption, but the concern remains that at low growth rates the global economy is skirting the edges of another financial crisis. Negative rates and quantitative easing are failing, not unexpectedly, to have the desired effect. We may be nearing the moment where interest in heavier infrastructure spending possibly financed by “Helicopter money”, given the global sovereign debt positions, could be rearing its head.
Watch out for any further easing in growth!
And other charts and data:
Annualised real GDP growth over rolling 5 and 10 year periods for France, Italy and Germany.
German growth stronger than Euro Area average post crisis but weakening of late:
The following chart shows the same for Euro Area household and non profit spending growth:
Fiscal austerity looks to have impacted growth, but financial crisis has increased indebtedness
Gross fixed capital formation in the doldrums:
An area of strength has been exports, in particular German exports, but this cycle may well have already peaked:
German manufacturing orders: Total manufacturing orders relative to trend:
Foreign manufacturing orders relative to trend:
Short term real quarterly growth in the Eurozone:
Consumer credit growth appears to be moving strongly upwards but key non financial corporate loan growth is lacklustre: