Friday, November 30, 2012

30/11/2012: Eurocoin continues to signal EA17 downturn in November



In November euro area leading growth indicator Eurocoin stood at -0.29 % which is the same level as in October. This reading "reflects the opinions of households and businesses, as recorded by the surveys, which overall remain still unfavourable, though signs of an easing of pessimism emerged in some euro-area countries less affected by the sovereign debt tensions". Some details can be found at http://eurocoin.cepr.org/index.php?q=node/148 .

Reading below zero signals contraction in economic activity and the Eurocoin is now under water for 14 months in a row. The reading of -0.29 is the 3rd lowest the indicator reached during the current downturn. 



Consistent with the current slowdown, the price-growth dynamics suggest that there is an opening for further ECB easing:


Per above, it is quite obvious that we are stuck in the quick sand of being very near the zero-rate bound and no improvements in growth.

Per below, current inflation is still above the target, but the direction of change is encouraging:

In particular, latest inflationary pressure easing appears to be in line with ECB expectations and suggest that inflation is relatively well anchored, although still ahead of the ECB formal target.

Furthermore, 3-mo MA for Eurocoin through November 2012 is at -0.3 and 6mo MA at -0.273, both close to -0.31 average for the crisis period of 2008-2009.

The mixed bag of indicators is firmly shifting toward some action from the ECB soon.
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