In the previous post I promised the update for the leading economic indicator, eurocoin, results for September.
In September, eurocoin remained at broadly-speaking the same level as in August, singaling contraction of -0.32 (August reading was -0.33). The indicator was on the positive side in equity markets and sovereign debt components, but came in with deterioration on firms and households surveys side.
This marks twelve consecutive months of sib-zero readings.
3mo MA for the indicator is now at -0.297, 6mo MA is at -0.195 and y/y the swing in the eurocoin is -0.35 points. Current reading is slightly worse than -0.31 average reading for 2008-2009.
Growth forecast based on eurocoin suggests -0.4-0.5% economic contraction in Q3 2012.
Monetary policy is now consistent with accommodative stance:
However, monetary policy remains outside the inflation targeting range:
Economic deterioration continues in y/y terms, while moderating inflation is also on track, suggesting that some further easing in the policy is still feasible in months ahead. My expectation would be for an ECB rate cut in October-November of 25bps.